Consumers can apply for a personal loan by filling out an application online, over the phone, or in person. Online applications are almost always the fastest way to inquire. To apply for a personal loan, potential borrowers usually need to fill out a brief form with information such as their name, address, bank account number, and desired loan amount.
When you need money quickly to take care of an unexpected emergency, apply for a personal loan! There are over 22 million Americans with a personal loan.1 Personal loans make excellent debt consolidation loans because the loan amounts are flexible. Depending on their eligibility, borrowers could receive a few hundred dollars or a couple thousand for personal expenses.
Interested in applying for a personal loan? Learn about the requirements first and what you can expect from the application process below.
Qualification Requirements for a Personal Loan
A personal loan is an installment loan available to eligible borrowers throughout the United States. Unsecured personal loans are most common, but you could apply for secured personal loans if you prefer. Before deciding to fill out a personal loan application, consider if you want unsecured or secured debt.
These are a few types of personal loan options:
- Bad Credit Personal Loans
- Same-Day Personal Loans
- No Credit Check Personal Loans
- Cash Advance Personal Loans
- Secured Personal Loans
Personal loan rates are lower than average, unlike many other fast cash loan options out there. With a decent interest rate, the repayment process can be a breeze. Borrowers can look forward to affordable monthly payments and flexible lengths of repayment.
Personal loans provide small and large loans depending on the borrower’s preference and credit history. Online lenders have a simple and convenient online process that you can complete right from home. Once you receive full approval, you can get your money in as little as one business day.
Credit Qualification for Personal Loans
If you want to apply for a personal loan, you may wonder if you meet the qualification requirements. Suppose you have a bad credit score, or an unestablished credit history. In that case, you may still be eligible for a personal loan without the use of collateral. Although a lender determines your eligibility by using your credit score, you could still qualify for the money you need with a low credit score.
One of the negative effects of having a bad credit score is that bank or credit union lenders often deny qualification. Low credit is an indicator of poor financial planning. It’s hard to qualify for loans as a high-risk applicant, so people with bad credit often settle for high-interest loans, such as payday loans or bad credit loans. You could choose to apply for payday loans. But this predatory loan option makes it hard for borrowers to escape a cycle of debt.
A personal installment loan is an emergency cash option available to people with all types of financial backgrounds. If you have struggled with your finances in the past, you may still qualify to get money in your bank account! But keep in mind that inquiring about another loan may further affect your credit score.
How a Personal Loan Will Affect Your Credit Score
If you have a bad credit score, you could still qualify for an emergency cash loan. When you apply for a loan, a lender will request a credit check. There are two types of credit checks, one of which may negatively impact your credit score.
Soft Credit Check
You can expect a soft credit check, or a soft pull, when you inquire about a loan and authorize the creditor to check your credit report. This type of credit check doesn’t appear on your credit report and does not affect your current credit score. You are not officially applying for funding, so there are no consequences.
Hard Credit Check
A hard credit check, also known as a hard pull, is the type of inquiry that does impact your financial history. A hard credit check will lower your credit score by a few points and stay on your credit report for two years. This type of inquiry is only done when you officially apply for a loan amount with a lender.
If you have a bad credit score, you may be cautious of any financial decisions that further lower your score. But having a personal loan could actually help your finances over time.
Five financial categories affect a credit score:
- Payment History: 35%
- Debt Owed: 30%
- Length of Credit History: 15%
- Debt to Income Ratio: 10%
- Credit Inquiries: 10%
When you complete a loan application, you impact your credit usage. If you don’t have a diverse credit mix, adding a personal loan to your credit report could positively affect the credit usage category. You can positively influence the most important category, payment history, simply by paying your personal loan on time every month. With time, your credit could slowly but steadily start to increase!
Can I Afford a Personal Loan?
Obtaining a personal installment loan could help you pay off high-interest student loans and credit card balances. But can you afford an additional monthly bill? Before you decide to apply for a personal loan, take a look at your finances. How much money do you have left to spend at the end of the month?
Calculate Your Monthly Income and Expenses
It’s essential to know how much disposable income you have at the end of every month. Knowing how much money you have to spend can help you make confident financial decisions, such as applying with online lenders.
To find out the total monthly amount of disposable income you have, you need to:
- Calculate your monthly income
- Calculate your necessary expenses
- Calculate your desirable expenses
Your gross monthly income is the amount you make before the deduction of taxes. To accurately know how much you receive, look at your pay stubs or a bank statement and add your total monthly income. If you are self-employed and use invoices to track income, calculate the average amount you earn monthly to determine how much money you have to spend.
The next step is to calculate how much you spend every month on necessary expenses. You cannot alter a necessary expense, such as rent, utilities, gas, food, insurance, etc. The final step in calculating your monthly payments is to add up your desirable expenses. These are additional costs you choose to make, such as paying for ad-free music and video streaming services.
Once you know how much you make and spend each month, you can determine how much you can spend on a loan.
Use a Personal Loan Calculator
The best way to know if you can afford a personal loan is to use a calculator. The personal loan calculator helps you see just how much borrowing money will cost. You can see the total interest cost and the total you will end up paying.
You can adjust the loan amount, interest rate, and repayment length. If you need to borrow a considerable loan amount, consider how much time you want to pay off the loan. A short repayment length will result in fewer interest fees, so you can save money in the long run. However, you will end up with a higher monthly payment. If you want more pocket money every month, a longer repayment length may be preferable.
If you can comfortably afford an additional monthly payment, go ahead and start a personal loan application.
Starting a Personal Loan Application
Once you are confident in your ability to pay back a personal installment loan, you can start the application process. While you could work with a lender in-person, there are plenty of online lenders to choose from. Online personal installment loans offer a quicker approval process and far more convenience.
There are generally three steps to follow when applying for a personal installment loan. Take a look.
Step 1: Completing an Inquiry for Pre Approval
Suppose you want to improve your financial situation with fast cash. In that case, the first step is to see if you are preapproved for a personal installment loan. You can complete the application form for online loans from the comfort of home.
A lender will ask you to provide personal and financial information, such as your name, address, contact details, income, and Social Security Number (SSN). A lender requires your SSN to verify your identity and run a soft credit check. This type of credit check does not affect your current FICO score or appear on your credit report. Lenders use your income information to determine if your pay stubs are enough to cover the cost of monthly payments.
If you qualify to receive a personal installment loan, you will be preapproved and receive a loan amount estimate.
Step 2: Submitting Documents
Once you are preapproved for a personal installment loan, you can start submitting your documentation for verification. The documents you need will vary by lender, but typically you will provide the following paperwork:
Proof of Identification
You will need to provide a valid government-issued photo ID to prove your identity. Lenders usually accept a driver’s license, state identification card, or US passport. The document should display your full legal name, address, and photo.
Proof of Income
You can provide recent income documents as proof of your ability to make loan payments on time each month. The paperwork you can provide depends on the lender. But typically, you can use paycheck stubs, bank statements, official invoices, or government award letters.
Proof of Address
To apply for personal installment loans in your state, you need to show proof of residency. Valid proof displays your full legal name and address. This includes recent credit card statements, utility bills, insurance statements, mortgage payments, or a lease contract.
Proof of Asset Ownership
Many personal installment loan lenders do not require collateral, but unsecured options are also available. If you want to secure money with collateral, you need to prove asset ownership. Lenders typically accept a certificate of deposit (CDE), cash in a savings account, car title, or property title.
References
References are not always required, but some lenders ask for them. You can usually provide a mix of professional and personal references.
Step 3: Getting Final Approval
Once an agent verifies your documentation, you can be fully approved for a personal loan! You will be asked for your direct deposit information, such as your bank name, routing number, and account number. You can expect to receive your emergency cash in as little as one business day!
It’s essential to know the process of loan applications before applying with a lender. Some loan options offer more convenience than others, such as online personal installment loans. If you need money soon, you can start and finish the approval process without ever leaving home.
Additional Information When You Apply For a Personal Loan
| Category | Description |
| Application Platforms | – Online: Many lenders offer online platforms for application submission allowing for convenience and quicker responses. – In-person: Some lenders, especially traditional banks and credit unions, allow for in-person applications, providing a more personalized experience. |
| Documentation | – Employment Verification: Some lenders may require employment verification documents such as recent pay stubs or an employment verification letter.- Co-applicant Information: If applying with a co-applicant, be prepared to provide their personal and financial information. |
| Customer Support | – Availability: Ensure the lender provides customer support through various channels like phone, email, or live chat for any queries or assistance.- Hours: Check the operational hours of the customer support to know when assistance will be available. |
| Security | – Data Encryption: Ensure the lender’s application platform uses data encryption to secure your personal and financial information.- Privacy Policy: Review the lender’s privacy policy to understand how your information will be used and protected. |
| Fees and Charges | – Origination Fees: Some lenders charge origination fees, which are deducted from the loan amount disbursed.- Prepayment Penalties: Check if the lender charges any penalties for paying off the loan earlier than the scheduled term. |
| Loan Modification Options | – Flexibility: Check if the lender allows for loan modification options such as payment deferrals or loan term extensions in case of financial difficulties.- Process: Understand the process and requirements for requesting loan modifications. |
| Customer Reviews and Ratings | – Reputation: Look for customer reviews and ratings on third-party websites to gauge the lender’s reputation and customer satisfaction.- Complaints: Check for any complaints or negative reviews to understand potential issues or areas where the lender may lack. |
FAQ: Personal Loan Applications
Credit unions often offer competitive interest rates and more flexible loan repayment terms compared to traditional banks. They also tend to have a more personalized approach, which can be beneficial for borrowers looking for customized solutions.
Different personal loan providers offer varying loan repayment terms, including interest rates, repayment periods, and fees. It’s essential to compare these terms to choose a loan that best suits your financial situation and repayment capacity.
Yes, applying to multiple lenders allows you to compare interest rates, loan repayment terms, and other conditions. This approach helps you make an informed decision and choose a loan that best meets your needs and financial situation.
A personal loan can be used for debt consolidation by using the loan funds to pay off multiple debts, such as credit card balances and other loans. This approach leaves the borrower with a single monthly payment, often with a lower interest rate, making debt management easier.
The disbursement of loan funds varies among lenders. Some lenders may release the funds within a business day, while others might take longer. Ensure you understand the lender’s disbursement process to plan accordingly.
Having good credit enhances your attractiveness as a borrower. It can lead to benefits such as lower interest rates, higher loan amounts, and more favorable repayment terms, making it easier and more cost-effective to borrow money.
Consider factors such as interest rates, repayment terms, fees, and the lender’s reputation. Also, consider the flexibility and support the lender offers, ensuring that the loan aligns with your financial needs and capabilities.
People commonly borrow money through personal loans for purposes such as debt consolidation, home improvement, medical expenses, wedding costs, and other significant expenditures or emergencies.
Yes, in some cases, you might be able to negotiate loan terms such as interest rates or fees with lenders, especially if you have a strong credit profile or an existing relationship with the lender. It’s always worth discussing your needs and preferences with the lender to secure the best possible terms.
Credit unions often have membership requirements, and they might consider additional factors beyond credit scores, such as membership longevity and involvement in the credit union, when evaluating loan applications. This approach can sometimes make it easier for members to secure loans with favorable terms.
CreditNinja’s Thoughts on Personal Loan Applications
Personal installment loans can be a great solution when going through a financial emergency. However, they are not the only solution! Before you commit to a hard credit check and apply for a personal loan, CreditNinja suggests you try alternatives like:
- Dipping into your savings account
- Asking to borrow a bit of money from a close friend or family member
- Getting a part-time job or side hustle to earn extra funds
- Have a garage sale and sell some belongings you no longer need or use
- Review your budget to see if there are habits you can change or expenses you can cut, like unused subscription services
Want to learn more about finances, handling your own budget, personal loans for a credit score under 600, and more? Check out the CreditNinja dojo for hundreds of free financial resources!
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