The process of obtaining a personal loan begins with evaluating your credit score, obtaining pre-qualification, and comparing various loan offers.
Finding and getting a personal loan doesn’t have to be hard. Knowing where to begin, what you need, and how to compare offers can make choosing the right personal loan easier.
Here are seven simple steps to guide you through the process of finding and getting a personal loan:
1. Check your credit
Start by looking at your credit score to understand your financial situation. A high score means it’s more likely you’ll get approved for a loan and get a lower interest rate.
Credit scores usually fall into these groups:
- 720 and higher: Excellent credit.
- 690-719: Good credit.
- 630-689: Fair or average credit.
- 300-629: Bad credit.
First, check your credit report for any mistakes that could be lowering your score. You can ask for your credit report from the three main credit bureaus—Equifax, Experian, and TransUnion. If you find any wrong information like missed payments, you can dispute them.
Make sure you pay your credit card and other loan bills on time. Also, try to keep the amount of credit you use compared to your credit limits low. These things are the most important factors that affect your credit score.
2. Calculate your loan payments
Knowing how much your loan payments might be can help you figure out if you can afford to borrow money with a personal loan.
First, figure out how much money you need to borrow. Make sure to include any extra fees the lender might charge. Usually, lenders take origination fees, which can be between 1% to 10% of the loan, out of the loan money.
Then, use your credit score to guess what interest rate a lender might give you. Your actual interest rate depends on your credit and financial situation, as well as what the lender decides. The table below gives an idea of what interest rates you might get based on your credit score.
| Borrower credit rating | Score range | Estimated APR |
| Excellent | 720-850. | 12.42% |
| Good | 690-719. | 14.82%. |
| Fair | 630-689. | 18.08%. |
| Bad | 300-629. | 21.10%. |
Next, think about how much time you’ll need to pay back the loan. If you choose a longer time, your monthly payments will be lower, but you’ll end up paying more interest overall.
After you figure out how much you’re borrowing, the interest rate, and how long you’ll take to pay it back, you can use our personal loan calculator. This will help you find out how much you’ll likely have to pay each month. The best personal loans have monthly payments that you can easily afford.
3. Research and compare lenders
You can get personal loans from online lenders, banks, and credit unions. But some lenders are better for certain people and reasons. For instance, some lenders are good for consolidating debt, while others are better for people with bad credit.
It’s smart to look into different lenders to find the right one for you. Here are a few important things to compare when looking at lenders.
- Credit score requirements: Online lenders give loans to people with all kinds of credit scores, from very low to very high. Banks usually want borrowers to have good or excellent credit scores. Credit unions are more open to giving loans to people with bad credit scores.
- Loan amount and repayment term availability: Personal loans can be as small as 50000 or as big as 5000000. You usually have to pay back the loan within two to seven years. Make sure to find a lender that offers loan amounts and repayment times that suit what you need. For instance, credit unions might offer smaller loans, like $2,500 or less, with low-interest rates.
- Funding time: After your loan gets approved, you can usually expect to get the money within a week. However, online lenders are usually the quickest at giving you the money.
- Co-signed, joint, and secured loan availability: Some lenders might let you include someone else on your loan application, like a co-signer or co-borrower. You can also offer something valuable, called collateral, to secure the loan. Doing this might help you qualify for the loan or get a lower interest rate.
- Co-signed, joint, and secured loan availability: Some lenders might let you include someone else on your loan application, like a co-signer or co-borrower. You can also offer something valuable, called collateral, to secure the loan. Doing this might help you qualify for the loan or get a lower interest rate.
4. Get pre-qualified personal loan offers
Once you’ve picked out a few lenders you like, it’s time to pre-qualify. Many lenders offer this. Pre-qualifying is important because it gives you an idea of what loan offers you might get, including how much interest you might have to pay.
When you pre-qualify for a loan, lenders usually do a soft credit check. This doesn’t hurt your credit score. It’s a good idea to pre-qualify with a few different lenders so you can compare the rates they offer and how much you might have to pay each month.
When you pre-qualify, you’ll need to give some personal information like your name, birthday, how much money you make, and what you want to use the loan for.
The best loan offer is usually the one with the lowest APR because it costs you the least amount of money.
5. Select a lender and complete your application
Once you’ve picked a lender that suits you, you can apply for the loan. Different lenders have different requirements, but you’ll probably need:
- Identification: A passport, driver’s license, state ID, or Social Security card.
- Verification of address: Utility bills or lease agreement.
- Proof of income: Pay stubs, bank statements, or tax returns.
When you apply, the lender will do a hard credit check. This might make your credit score go down a little for a short time. It could also show up on your credit report for up to 24 months.
Some lenders will tell you right away if you’re approved, while others might take a couple of days.
7. Sign loan agreement and get funded
The last thing you need to do to get your personal loan is sign the loan agreement. You should get the money within a week. Some lenders might give you the money on the same day or the next day after they approve your loan.
After you get your money, it’s important to plan how you’ll pay back your loan. Your first payment will probably be due around 30 days after you get the loan.
One way to make sure you pay on time is to set up automatic payments. This means the money will be taken from your account without you having to remember to pay each month.
