How to Apply for a Personal Loan

By Caroline Banton · October 30, 2023 · 10 minute read

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How to Apply for a Personal Loan

By now, you’ve probably already calculated how much of a personal loan you can get. And you likely have a solid understanding of the personal loan requirements to get approved. You may be wondering about the next step in the process: how to get a personal loan.

Applying for a loan can be relatively simple, as long as you understand the options available to you, meet the lender’s requirements, and have the necessary paperwork in order ahead of time. Here’s what you need to know.

1. Prequalify for a Personal Loan Through Multiple Lenders

The first step in applying for a personal loan is to get prequalified. You can get a personal loan from a few different sources, including a bank, credit union, or an online lender. Each has its pros and cons.

Personal Loan from a Traditional Bank

One drawback of getting any type of personal loan from a bank is that it can take longer to be approved compared to an online lender. However, banks have greater lending power, so you might be able to get a larger loan. Plus, many banks will not charge an origination fee.



In-person application High credit score requirements
Low or no origination fees High maximum APRs
Low minimum APRs Slow approval

Personal Loan from a Credit Union

Credit unions are likely to offer the lowest APRs and have low fees to boot — two advantages if you’re already a member of one. However, there are potential tradeoffs. Smaller credit unions tend to have limited digital offerings compared to national banks, and it may take borrowers longer to get approved for a personal loan.



Lower interest rates than banks and online lenders You have to be a member
Low fees Digital offerings may be more limited
Members may find it easier to get a loan with a credit union vs. a bank Slow approval

Personal Loan from an Online Lender

With an online lender, your personal loan application is approved and managed entirely online — there is no opportunity to sit down with a loan officer. Depending on whether you’d prefer to apply for a loan online vs. in person, this could be either an advantage or a disadvantage.

If you visit an online loan aggregator site, you can apply for preapproval and receive multiple loan options. From there, you can easily compare the rates and terms, but be sure to confirm the fees and charges.



You can easily compare rates and terms of online lenders on aggregator sites Fast approval process, with funds deposited sometimes within one business day
Get multiple loan offers from an aggregator site with no hard credit pull Potentially high fees
The loan application process can be managed completely online If you don’t have a great credit score, you might face a high APR

Awarded Best Online Personal Loan by NerdWallet.
Apply Online, Same Day Funding

Does Preapproval Hurt My Credit Score?

In order to be preapproved for a personal loan, a lender will check your credit history. Typically, the lender will only perform a “soft” credit inquiry, which will not affect your credit score. A preapproval determines if you’re eligible for a loan before you formally apply.

Applying for a loan triggers a “hard” credit inquiry, which could pull down your credit score because you have applied for additional credit.

You can check with a lender to find out what type of check they will do to preapprove you for a personal loan.

Recommended: Personal Loan Glossary: Loan Terms to Know Before Applying

What Do I Need to Prequalify for a Personal Loan?

To qualify for a personal loan, you will need to first determine how much you want to borrow and how much you can afford to pay each month to pay off the loan. How much you can pay each month will determine the term (length) of the loan.

How much you want to borrow will depend on what you want to use the money for. While there are few limitations on how you spend the personal loan funds, it’s wise to borrow as little as possible because you will be paying interest on what you owe.

When you fill out the application, the lender will ask you for personal information. Typically, this includes:

•   How much you want to borrow and for what purpose

•   Proof of your net income and assets

•   Your contact information and social security number

2. Compare Your Options

Getting preapproved from various lenders is critical if you want to try to get the best rates and terms. The preapproval will show you the amount of the loan you qualify for, the APR, term, and any origination fees. By comparing multiple lenders, you can find the loan that will cost you the least. Be sure to check all the fees that may apply.

If you’re trying to get better loan terms, you may want to explore adding a cosigner who has a good credit score. Doing so may help the lender view you as less of a risk, and they may be inclined to offer you a lower interest rate. However, keep in mind that if you make late payments or default on the loan, the cosigner’s credit will suffer, as will your own.

how to apply for a personal loan

3. Gather Required Documents

Before you sit down to fill out an online application or visit a bank or credit union, gather all the documents you will need. These will likely include:

•   ID, such as your driver’s license or passport

•   proof of address, such as a recent utility bill

•   proof of employment and earnings (paystub)

•   your social security number

•   your education history

4. Apply for a Personal Loan

Once you have all your documents on hand, you are ready to fill out either an online or in-person loan application. If you are applying online, you will be required to scan the documents and upload them with the application.

Recommended: Exploring the Pros and Cons of Personal Loans

How Long Does It Take to Get a Personal Loan?

The amount of time it takes for your loan application to be approved and processed depends on the lender. Online lenders tend to be the fastest. Submitting the application online only takes a few minutes, provided you have all your documents on hand, and approval can take one or two business days. You can expect to see the funds deposited into your bank account within one to three business days of approval.

Banks and credit unions, on the other hand, tend to be slower. You may need to apply for a loan in person and, depending on your relationship with the institution and your financial history, getting approved could take one to three business days. You might need to wait three business days or more to receive the funds.

Does Everyone Get Approved for a Personal Loan?

Not everyone is approved for a personal loan. Lenders consider your credit score, payment history, income, and debt-to-income ratio when deciding whether to approve someone for a personal loan.

Credit Score

The higher your credit score, the lower your interest rate will be. This is because if your credit history is good, the lender considers you low risk. A high interest rate is what protects a lender from the risk of lending to someone who might default on the loan. A score of 640 or more is generally considered enough for a borrower to potentially qualify for a loan from some lenders. If your credit score is low, consider bringing on a willing cosigner with a better credit score.

Payment History

How you’ve managed loan payments in the past is something that a lender will consider. If you have paid off loans on time and made timely credit card payments, the lender may not consider you high risk and could be more likely to approve your application. If you have a history of late payments, however, you might find it more difficult to get approved for a loan.


Lenders want to make sure you can pay back what you borrow. They’ll look at your income to make sure it is steady and that you can afford to make the payments each month. Some lenders might request your W-2 tax forms, bank statements, or recent pay stubs. Others could require verification from your employer of stated income and to confirm current employment.

Debt-to-Income Ratio

Your debt-to income (DTI) ratio shows how much you are already paying toward debt each month and is an indicator of how well your current income can cover an additional monthly loan payment. If you have no spare cash left over after paying existing debts, such as credit cards and mortgage, you likely cannot make the payments on a personal loan. A DTI ratio of 35% or lower is considered favorable for a personal loan.

What Do You Do If You Are Denied a Personal Loan?

There could be many reasons your loan was declined. Your credit score might not be high enough, your DTI ratio could be too high, or perhaps you failed to provide the right paperwork. Find out why your loan was denied so that you can fix the problem.

If your loan application is declined,you can receive a free copy of your credit report. Check that the information on the report is accurate. See if you can boost your credit score by opening new accounts that report to the credit bureaus (if you’re trying to establish your credit), maintaining low balances, and making on-time payments.

Note that applying too often for new loans or accounts triggers hard credit checks, which can lower your credit score. Another option is to find a cosigner. A cosigner with a good credit rating might help you to secure a personal loan with a favorable rate.

If you have a high DTI ratio, you might have to pay down some of your existing debt in order to receive a loan with good rates. Alternatively, you might consider taking out a smaller personal loan and supplementing the rest from other sources.

💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

The Takeaway

When it comes to applying for a personal loan, you have a few different sources to explore: banks, credit unions, and online lenders. Each has advantages and disadvantages.

To find the best loan rates and terms available to you, consider getting preapproved from multiple lenders and seeing which loan will cost you the least. You’ll also want to gather essential documents before you fill out the application. This may include your ID, proof of address, proof of employment and earnings, social security number, and education history. If your loan application is declined, find out what the issue was so you can fix it. The solution may involve boosting your credit, lowering your debt-to-income ratio, or taking out a smaller personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


Does everyone get approved for a personal loan?

Individuals may be denied a loan from a lender because they do not meet the requirements. A lender will consider your credit score, payment history, income, and debt-to-income ratio when deciding whether to qualify you for a loan. You also are required to submit documentation, such as proof of identity, residency, income, and your social security number.

What do you do if you are denied a personal loan?

If you are denied a personal loan, find out the reason why. Lenders are required to issue an adverse action notice informing you why you were denied. The most common reasons are a low credit score, a poor payment history, a high debt-to-income ratio, insufficient income, or failure to provide the right documents. If your credit score is too low, check your credit report for inaccuracies. Then, you might have to take steps to improve your score.

If your debt-to-income ratio is too high, try to pay down some of your debt. Other options are to apply for a smaller loan, find a cosigner with a good credit score, request a cash advance from an employer, or ask family or friends.

How long does it take for a personal loan to be processed?

A bank or credit union might take up to a week to deliver funds to your account. However, online lenders deliver funds within one to five days once you are approved.

Photo credit: iStock/PeopleImages

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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