How to Apply for a Personal Loan

How to Apply for a Personal Loan
Written by Publishing Team

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Borrowing money comes with some risk and, in many cases, some fees. Before applying for a loan, you should know what to expect.

Personal loans are growing in popularity: Roughly 22% of US adults own a single loan, according to credit bureau Experian. People usually use them to consolidate or refinance debts, but they can also help you finance a home improvement project, take a vacation, or cover the costs of moving across the country.

Just make sure you understand the terms and conditions before taking out a personal loan, including interest rates, set-up fees, and early repayment penalties.

You also need to know how to apply: Personal loan applications take a little longer than credit card applications, because you are required to provide more documentation. Below, Select provides a step-by-step guide to the process.

Step 1: Determine how much you need

The first step in choosing a personal loan is knowing how much you need. The smallest personal loans start around $600 (from a lender like PenFed credit union), but you’ll more commonly see a minimum of around $1,000. If you need less, it may be easier to save extra cash, borrow money from a friend or family member or put fees on your credit card.

Step 2: Pre-qualify and compare offers

Once you know how much you need, you’ll want to do some research and compare the rates and fees of different loan providers. An easy way to get started is by using our loan comparison tool.

Select’s Personal Loan Comparison Tool asks you 16 questions, including your annual income, date of birth, and Social Security number so Even Financial can determine the best offers for you. The service is free, secure and does not affect your credit score.

The tool is provided and operated by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is provided directly to Even Financial. Select He does not have access to any data you provide. Select may receive affiliate commission from partner offers in Even Financial Tool. The commission does not influence the choice of order of performances.

When you review a variety of loan offers using the above tool, you can get a better idea of ​​the loans you will be eligible for, including how much you can borrow, the interest rate you might have, and the terms of the loan.

Lenders like Marcus and LightStream also have prequalification forms on their websites.

Applying to pre-qualify for a loan is usually considered a “soft pull” and isn’t a difficult inquiry about your credit report, which can hurt your credit score. Read the finer details to be sure, as most sites explain this up front.

For a simple query, you will need the following information:

  • Name, date of birth, address and (for most loans) a Social Security/Tax Identification Number
  • Annual income (including salary, wages, tips, bonuses, and other forms of income)
  • Basic financial information (rent/mortgage payment, other major bills)
  • The ideal loan amount and term

Review your available offers and choose the one that works best for your schedule and budget.

Step 3: Collect documents and submit the application

Once you have reviewed your loan options, you will want to make a decision and submit a complete application. Ideally, you only do this once because it’s a tricky inquiry about your credit report.

The documents needed will vary depending on your lender, but you should usually have proof of your monthly income and expenses. Documents may include:

  • Recent salary(s)
  • Verify account statements for the past three to six months
  • Photo ID
  • Address proof
  • Education history (including highest level/degree achieved)
  • Other financial information (retirement account statements, outstanding debts, investment assets, etc.)
  • Preferred direct deposit bank account

Read the terms carefully one last time, then submit your documents.

Step 4: Wait for approval and funding

It can be approved within an hour after you submit your application, or it can take three to five business days.

If your application is approved, you can expect to see your loan amount, minus any set-up fees, in the bank account you listed for direct deposit. If you are taking out a debt consolidation loan, you may choose to send your money directly to credit card companies to pay off your balances. And if you don’t sign up for a direct deposit, the lender will mail you a paper check.

Once the funds are in your account, expect to pay off the first installment of the loan within 30 days. Double-check to make sure you’ve signed up for automatic payment (you may even get an interest rate discount if you do). Add your monthly payment amount to your budget so you never miss a bill, because paying on time is important to keeping your credit score in good shape.

Editorial note: The opinions, analyses, reviews or recommendations contained in this article are those of the editorial board alone, and have not been reviewed, approved or otherwise endorsed by any third party.


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