Emergencies happen. Even with the most carefully planned budget, you can run up against unexpected costs, fees, or expenses you didn’t anticipate. You might have to pay off unexpected medical expenses or cover moving costs. Sometimes it’s not even necessarily an emergency, but you need money and you need it as quickly as possible.
The thing is, most of us don’t have it—only 40% of Americans are able to cover an unexpected $1,000 expense without resorting to credit. In some cases, a personal loan can provide an alternate strategy for filling in financial gaps. Credit cards often carry high interest rates, the average annual percentage rate (APR) on existing credit card accounts is around 14.14% , according to WalletHub. For some borrowers, a personal loan can offer a lower interest option for filling in financial gaps or paying for a large expense.
While personal loans can help someone get funds, the loan would still accrue interest. Relying on an emergency fund as a first option for unexpected expenses might be a more responsible alternative. But in cases where an emergency fund or long-term savings plan aren’t enough to help make ends meet, a personal loan could provide a lower interest option than credit cards.
There are plenty of other reasons to consider a personal loan. Maybe you want to lock down a home remodel or consolidate high-interest credit card debt. If you’re looking to speed up the approval process for a personal loan there are a few tips that could help you qualify more quickly.
If you’re hoping for swift approval on your personal loan application, there are at least two stages of the process to consider:
• How you stack up as an applicant
• The lender you’re borrowing from
If you want to get approved quickly for a personal loan, you’ll first want to get your finances organized and then you’ll want to compare various lenders’ approval times.
Setting Yourself Up as a Better Personal Loan Candidate
There are specific qualifying criteria most lenders, including SoFi, look at when considering approving a personal loan application. Lenders typically review at least some of the following borrower information when reviewing an application for a personal loan:
• Credit history, score and debt
• Proof of ongoing stable income
In order to increase their chances of getting approved quickly, borrowers typically want to put their best financial foot forward. That means showing that they have steady income, an unblemished financial history, and a solid credit score.
It’s worth noting that there are a variety of different scoring models and each lender might have their own criteria for reviewing a potential borrowers credit. With that in mind, Experian does offer some insight into interpreting credit scores—generally a score FICO® Score above 670 can be considered “good,” above 740 as “very good,” and above 800 as “exceptional.”
But credit score is just a portion of the information a lender will need. While it is usually a primary factor, it’s likely not the only factor that will determine if your application is approved or not.
To make the application process a little easier, you can assemble the financial information that might be requested. It can save time during the application process if you’ve already gotten together all the information you need to apply for a loan. To apply for an unsecured personal loan, you may need items like:
• Proof of Identity: The exact documents requested may vary, but you might need to submit a government-issued ID such as a driver’s license, proof of your Social Security number
• Proof of Address: Certain laws are influenced by your state of residence. Some lenders may also want to know if you rent or own a home.
• Proof of income: Lenders want to know you can pay back your debt. Some may request your W-2 tax forms, recent pay stubs, or bank statements. Some may require verification from your employer of stated income and to confirm current employment.
Most lenders look at your credit history, credit score, income, and debt-to-income (DTI) ratio when considering your personal loan application (among other factors). Lenders use DTI ratios to get an idea of a borrower’s ability to repay a loan based on how much money a person is making compared to how much money they already owe. The ratio can be calculated by adding up the total monthly debt a person owes and then dividing that total by the individual’s gross monthly income.
The exact criteria used to determine a borrower’s creditworthiness may vary by lender. Compiling commonly reviewed information, like your credit score and DTI, ahead of actually applying, can sometimes shed light on whether you’ll be approved for a personal loan or not. Some things a lender might see as problematic include:
• A short work or credit history
• Low, unstable, or no income
• High debt-to-income ratio (varies by lender)
• Too many credit inquiries in the recent past
In addition to having all your information ready, you’ll also want to consider how much money you need to borrow. Too small, and you might not fully cover your expenses.
Too large, and you’ll have to pay interest on money you don’t even need. Knowing that magic number before you apply for a loan can save you the back and forth that could be required if you’ve been approved.
If you’re in need of money quickly, but have a less-than-strong credit history, another option may be to apply for a personal loan with a co-borrower. A co-borrower takes out a loan with you, so you’re essentially borrowing the loan together. The co-borrower is equally responsible for loan payments, and if either of you miss any payments on the loan, both of your credit scores could be impacted.
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Finding a Faster Lender
The other half of the personal loan equation is determining which type of lender works best for your needs. Not all lenders work on the same timeline, some will grant approval faster than others. But, speed can sometimes come at a premium.
Traditional banks and credit unions typically take a few days or a few weeks to review and approve applications before disbursing funds. If you have less than ideal credit and are looking for a smaller loan, you might consider shopping rates and terms at a few local lending institutions. However, if speed is required, you may be able to find faster alternatives.
There are a handful of traditional bank lenders who can approve a personal loan for well-qualified applicants in less than a week. Many quick-approval personal loan lenders, however, are online or non-traditional lenders.
With online lenders, like SoFi, funds should generally be available within a few days of approval. One of the major benefits of the online route is the fast application time. If you have all your information ready, it can be quick and easy to apply using an online form.
Since it can be easier and faster to apply for personal loans online, you might take some time to compare rates against different lenders. Another benefit of online lenders is that you can pre-qualify and see your rate before you fill out a full application.
At the pre-qualification stage, you’d usually provide some basic personal information and the lender typically performs a soft credit check to determine the amount of money you could be approved for and at what interest rate and loan term.
A soft credit check shouldn’t impact your credit score (but make sure that’s what the lender is doing during their pre-qualification check—they should make that clear).
After you have gotten quotes from a few different lenders, it’s typically easier to determine which loan meets your needs. Once you have a few different quotes, take time to compare:
• Each lender’s terms. This includes loan terms, late fees, insufficient funds (NSF) fees, etc.
• Repayment periods—a typical repayment term can range from 12 to 60 months depending on the lender.
• Origination fees—some lenders may charge a one time fee up front for processing your loan application and closing the loan. Origination fees on personal loans can range from 1% to 8% of the loan amount in some instances and can typically be rolled back into the loan or paid for through the loan proceeds.
• Any additional fees or premiums
Once you feel comfortable with the lender and their terms, then you’re probably ready to formalize the loan. As you explore personal loan options, consider a loan with SoFi where there are absolutely no fees — including no prepayment penalties or origination fees required.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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