Need a personal loan? Don’t take a credit hit without knowing whether you can qualify. Read on to learn all about personal loan requirements.
About a third of Americans take out a personal loan in a given year. Looking to join them with a personal loan of your own? There are some things you should know before you apply.
Getting rejected for personal loans can put you in a bad financial position. However, you can avoid rejections and get the loan you need by getting prepared. Knowing the personal loan requirements is an important first step.
Not sure how to get approved for a loan? We can help. Read this before starting your applications — we’ll get you the results you want!
What is a Personal Loan?
Not sure what a personal loan really means? Let’s go over the basics.
With a personal loan, you’re borrowing money for “personal use.” This can encompass a wide variety of purposes. Personal loans are different from loans you’ll get for specific purposes, such as to buy a car or start a business.
When you take out a personal loan, you’ll get a large amount of money up front, and then you’ll pay it back gradually over time. Although different lenders offer different kinds of personal loans, they all follow this basic structure.
Since personal loans don’t involve collateral like other kinds of loans do, they’re often harder to qualify for. That’s why it’s so important to understand the qualifications ahead of time so you can prepare accordingly.
Personal Loan Qualifications
First, let’s take a look at the basic qualifications you usually need to have before getting a loan.
The specific requirements for a personal loan will vary from lender to lender. However, what lenders basically want to see is whether or not you’ll be able to repay your loan.
A significant piece of that puzzle is your credit score and history. Lenders use credit scores as a shorthand for how likely someone is to repay a loan.
They’ll also look for other evidence that you can pay back your loan. This might include your savings, income, and other financial information.
Not sure if you qualify for a loan? Follow the steps below so you can get approved faster.
How to Meet Personal Loan Requirements and Get Your Money
If you have an exquisite credit score, lots of income, and minimal debt, getting a personal loan is easy. However, if you meet that description, you probably don’t need a loan in the first place.
For most people who need a loan, getting approved isn’t a sure thing. However, these steps will help you make sure you meet the requirements before you apply.
- Review Your Finances
Before you apply, take a close look at your overall financial picture. You’ll use this information to determine the size of the loan you’ll need, as well as how easily you’ll be able to keep up with payments.
It’s all too easy to take on a big loan because you’re excited about getting all that cash up front. But if you can’t keep up with the payments, you can put yourself in an even worse financial situation. Knowing your finances well will also help you find a lender who will actually approve you.
This is a good time to make a budget so you can track how much money is coming in each month, and how much you’re spending. That way, you can see how much you’ll have left over to repay a loan.
- Research Lenders
The exact interest rates and repayment terms will affect what your monthly payment looks like, as well as the overall amount of the loan. Your next step should be researching lenders so you can get an idea of the kinds of loans available, and which ones might work with your budget.
Compare the rates from different lenders, and start making a list of loans that sound like a good fit.
- Review Your Credit Report and Score
Next, it’s time to look at your credit score and credit report. A lender will use this information to decide whether or not to approve you for the loan, so you should know what they’re going to find.
If your credit score is below the “good” range, you might want to work to build it up before taking out a personal loan, if you have time. A higher credit score doesn’t just make it easier to get a loan. It also lets you get a loan with better terms.
To get the bigger picture of what lenders will unveil, you should also request a copy of your credit report. You can get a free copy once a year from the three main credit bureaus.
On your credit report, you’ll see a complete picture of your debt, repayment history, and more. You can also check your credit report for errors — addressing them will often help you raise your credit score.
Even if you don’t find any errors, you might see other ways to use your credit better and raise your score.
Do you have a low credit score, but need a loan right away? Check this out: it is possible to find lenders who will work with you.
- Apply for a Loan
Once you’ve done this work, you can go back to your list of lenders and choose the one with the best rates that you’re most likely to get approved by.
They should have instructions for the application process online. Many lenders let you complete your loan application online, but some will require an in-person visit.
Don’t forget to gather the documents you’ll need to complete the application ahead of time. These might include pay stubs, personal identification, banking information, and more.
Gathering this information ahead of time helps you speed up the application process, so you can get approved faster.
Ready to Get Your Loan?
With these personal loan requirements fulfilled, you’ll soon get the loan you need to move forward.
A personal loan can help you pay off high-interest debts, achieve specific goals, and much more. Looking for more funds beyond your personal loan amount? Don’t miss our guide to making more money here!