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To get a personal loan, you will need good credit, a stable income and a proven work history.
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Bad credit loans are available, but rates can be high and loan amounts are limited. You’ll qualify for a lower, more competitive rate with good to excellent credit.
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Most personal loans are unsecured, which makes them faster and easier than collateral-backed loans.
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Shopping around for personal loans with multiple lenders can get you the best deal.
Getting a personal loan is relatively simple. Most lenders offer a complete online application process and only require information about your income, credit history and bank account to get a quote. Your final offer requires a strict credit check and proof of your last few paychecks.
If you have excellent credit and little credit, you can borrow up to $100,000 from some lenders with repayment terms of up to seven years. However, if you have fair or bad credit, you need to take extra steps to increase your chances of approval and should expect to pay higher rates and fees depending on how much you can borrow.
Knowing the steps required to get a personal loan can help you get cash quickly for debt consolidation, home improvement, medical bills or other expenses.
Personal loan annual percentage rates (APRs) can range from just 6% to 35.99%, and the rate you get depends on your credit score. Higher scores (usually 670 or above) translate to lower rates, larger loan amounts and fewer fees.
Lenders rely on your credit score to estimate how likely you are to repay the loan as agreed – a higher credit score indicates your history of responsible credit use, and as a result, you qualify for the lender’s lowest rate. The difference between a loan with excellent credit and a personal loan with bad credit can be hundreds of dollars per month and thousands of dollars in general interest.
According to TransUnion’s Unsecured Personal Loan Industry Insights Report, which is based on real, unsecured personal loan data, here’s how your credit score can change your APR:
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Risk level
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Credit score limits
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Average estimated APR
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Close to the first
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601-660
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26.90%
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Azam
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661-720
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17.80%
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Prime Plus
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721-780
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13.00%
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super prime
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781+
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10.90%
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Example: For the average borrower, a $10,000 personal loan at 27% over five years costs $15,000 in interest — more than the loan itself.
Banking instruction
Consider working to improve your credit score if you don’t qualify for a cheaper rate.
Your credit score is typically the most important piece of the eligibility puzzle, but lenders also review other criteria when evaluating your loan application. According to an experienced Chase Bank representative, these criteria often serve as initial screening. While each lender sets its own criteria, understanding common approval metrics can help prepare and improve your chances of qualifying.
Decide exactly how much debt you need and how much you can repay each month. Personal loans are installment loans, which means you get the full amount up front and then pay it back in fixed monthly payments. If you need more money, you have to apply again for a new loan.
Be sure to consider any initial fees when determining how much to borrow. Some personal loan lenders charge a principal fee of up to 12% of your loan amount, and the cost is typically deducted from your loan funds before you receive them. If you choose a lender that charges this fee, you may end up borrowing a large amount to account for the fee.
Here’s an example of how the APR and fees affect the monthly payments on a $10,000 loan with a three-year term:
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APR
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Initiation fee
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Get the loan amount
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Monthly payment
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Total interest + fees
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9%
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0%
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$10,000
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$318
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$1,448
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15%
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5% ($500)
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$9,500
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$346
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2,456 dollars
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25%
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8% ($800)
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$9,200
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$398
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$4,328
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Banking instruction
Once you’ve zeroed in on your debt amount, run some numbers using a personal loan calculator. Experiment with longer terms if you want to keep your payments low or shorter terms if you want to pay off the balance quickly.
You will need to provide loan documents to verify the information in your application, and gathering these documents ahead of time can speed up the process later.
Some lenders may verify this information electronically.
Don’t settle for the first offer. Compare multiple lenders and loan types to get an idea of what you can afford.
If you’ve had a long-term account with your bank or credit union, see if it gives you a better rate or offers you any perks or discounts. You can also search Bankrate’s personal loan marketplace to find the most competitive loan that best meets your borrowing needs.
Give preference to lenders who offer qualifications
Loan pre-qualification involves entering some basic information and reviewing your potential eligibility and interest rate. This process does not require hard credit inquiries, so your credit score will not be affected. Pre-qualification is not a loan offer, and your loan details may change when you officially apply, but it can be a great way to narrow down your list of potential lenders.
Once you compare lenders and choose the best fit, submit a formal application. This may include a tight credit bridge and additional verification.
If approved, you will receive loan terms. Review carefully before signing – longer terms lower your monthly bill but increase total interest costs.
Note that the terms of your offer may vary depending on the documents you provide. Ask the lender to explain any changes to your interest rate or loan amount after your initial application.
If your loan application is approved, the lender will prepare your final loan documents. Once you agree to the terms and sign the loan agreement, most lenders will disburse the funds directly to your bank account within one business day at most lenders. If you choose a physical check or work with a small bank or credit union it may take up to a week to receive the loan funds.
Track when your payments are due, and consider setting up automatic payments to simplify the process. Some lenders even offer interest rate discounts if you use auto pay.
Banking instruction
Consider making an extra payment to the loan principal each month, even if it’s just a small amount. While personal loans are often cheaper than credit cards, you’ll still save money by paying off the loan over time.
Getting approved for a personal loan can be a simple process. Increase your chances of approval by taking some steps ahead of time, such as knowing your credit score and understanding the lender’s requirements. Doing some research before you apply could make the difference between a green light for financing or a loan denial. Compare lenders to find the best rates and terms for your specific financial situation.
