Are you wondering how to get a personal loan? Personal loans offer borrowers a flexible way to pay for big-ticket items or emergencies without having to pay the high interest that comes with most credit cards. Getting approved for a personal loan, however, can be tricky because banks want to know your financial situation before they approve your loan application. As long as you have good credit and a steady income, though, getting approved shouldn’t be too hard if you follow these 10 steps to getting a personal loan.
Before you can even apply for a personal loan, it’s important that you gather as much information as possible. Start by checking your credit report and score and then review any other loans or lines of credit you currently have. This way, when you apply for a personal loan, you’ll know exactly how much debt you already have. That way, if things go wrong during your application process, at least you’ll know exactly what went wrong. If it turns out that your lender denied your application because of high existing debt on other accounts, start thinking about ways to pay down those balances and lower your overall borrowing costs so that applying for another loan is more realistic next time around.
2: Find your bank
To apply for any type of loan, you need a bank account. If you don’t have one already, begin by choosing a bank. Don’t worry about fees right now we can work with most banks and have relationships with several local ones that will offer low-interest rates and flexible payment plans. Once you’ve decided on your bank, go in and speak with them about setting up an account and getting approved for a personal loan (if they don’t offer it themselves). It won’t take long at all. In fact, most people are approved within an hour or two after walking into their branch office! You may also be able to get pre-approved online if you don’t want to go into your local branch office.
3: Get approved online
There are tons of online options available for getting approved for loans, even if you have bad credit. Using an online service like SoFi can help you find lenders who will work with your specific needs and offer competitive rates in many cases. You’ll usually fill out an application and then you’ll be asked to provide some documentation about your employment, bank accounts, etc. After everything is verified, you can get approved immediately and move on to Step 4! No need to waste time going from branch to branch – save yourself time by jumping straight online.
4: Compare rates
The interest rate you pay is just as important as your credit score and income. When comparing rates, look at both annual percentage rates (APRs) and finance charges. Finance charges are generally lower than APR, but they vary depending on your loan. If you plan to make extra payments throughout your loan term, look for loans with low or no prepayment penalties more on that in Step 8! Your credit history isn’t only important when getting approved for a personal loan; it also determines how much interest you will be charged. If you have great credit, don’t expect that to cut down your interest rate dramatically but it could!
5: Choose repayment terms
After you’ve selected all of your loan details, it’s time to choose repayment terms. Most loans come with an array of options. Some loans have fixed rates, and others offer variable or capped rates. A loan’s interest rate and loan term will affect your monthly payment amount. You might want to pay more each month for lower monthly payments or pay less each month for higher monthly payments, which can help reduce how much interest you end up paying overall on your loan.
6. Contact the lender directly
It’s tempting to skip over this step and jump straight into applying for a loan, but you don’t want to submit an application without first making sure that your credit report is accurate. An inaccurate credit report could result in rejection or, even worse, being approved for a higher loan amount than you can actually afford. That’s why it’s important to make sure everything is accurate before filling out that application form. You have three options: You can pay $12 per month for Experian CreditWorks Basic (available through your bank), use Credit Karma, or purchase your reports directly from each bureau ($15–$25 per report). For maximum benefit, go with all three.
7. Check the facts
Not all companies are created equal, so it’s important that you get your facts straight before you sign on with anyone lender. For example, does each provider offer loans for different purposes? Do they charge different interest rates for unsecured personal loans and what is their lending range? How long will it take them to process my application? Is there an online application form or do I need to fill out paperwork in person at a local branch office? Before you apply, make sure you have all of these details in writing. This is especially important if you plan on shopping around between providers because some applications are designed to screen people out and your time isn’t free.
8. Follow up with paperwork
You’ll need to file an application and send in paperwork. Depending on your loan, you might need additional documentation or information. Make sure you get all of that together right away; otherwise, your chances of getting approved could slip through your fingers. You don’t want delay tactics to work against you. By following up with paperwork quickly, you can reduce any potential delays in getting approved for a personal loan in as little as 24 hours (in many cases). Check out our list of other ways to speed up processing time when applying for loans.
9. Submit the application
Once you’ve reached out to several lenders and received a written quote, it’s time to submit your application. Be sure that all of your paperwork is in order and double-check everything before submitting it! You don’t want an error on your application to be grounds for denial. The average FICO score for consumers getting approved for personal loans is about 720, according to Experian. So if you have great credit but haven’t heard back from lenders after three or four days, don’t give up hope you may just need one last push!
10. Review your credit report
Don’t forget that getting approved for a loan depends on your credit report and score. In order to get approved, you must ensure that you are in good standing with your credit card companies and other creditors. When you check your credit report, make sure there aren’t any errors on it. A single error could impact your ability to get a loan at all! If you see anything suspicious on your report, contact both of the major bureaus (Equifax and TransUnion) and ask them about it. Depending on how serious it is, they may be able to resolve any discrepancies quickly and easily.