How to Get Approved for a Personal Loan
Bills Bottom Line
If you're worried about a "no," you could lower the odds of one before you ever apply. Lenders weigh your credit score, income, and debt-to-income ratio (DTI). Many lenders let you check rates with a soft inquiry that doesn't affect your score, so you can compare real offers and apply with confidence.
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You need a personal loan, and you're sitting on the apply button—but you can’t bring yourself to click it yet. Part of you is afraid the answer is no. Another part is afraid that just asking will knock points off your credit for nothing.
Here's the good news: Getting approved for a personal loan isn't a random coin flip. Lenders look at a specific, knowable set of things, and many let you look at your options before you risk anything.
You also have real moves you could make to strengthen your odds. A rejection from one lender isn’t the end of your borrowing journey.
What personal loan lenders look at when they decide
Lenders want to know how likely you are to repay your loan. They judge that likelihood using a variety of factors. Each one answers a version of the same question: If we lend you this money, can you pay it back?
Here's what each factor tells a lender:
- Credit score: A snapshot of how you've handled credit. Lenders generally treat scores below 620 as higher risk.
- Credit report: The details behind the score, including your record of on-time payments.
- Income and employment: Proof you have steady cash flow to cover a new monthly payment.
- Existing debt: Whether you can afford a new loan payment, usually measured via your debt-to-income ratio (DTI).
How debt-to-income ratio works
Your debt-to-income ratio carries more weight than most people expect. DTI is all your monthly debt payments divided by your gross monthly income. Housing costs (your rent or mortgage payment) count as part of your monthly debt payments.
Lenders tend to prefer a DTI around 36% or below. Above 43%, your lender options tend to narrow. Consider 50% DTI and higher to be the danger zone.
What credit score do you need to get a personal loan?
There's no universal minimum credit score needed to get approved for a personal loan. Some lenders work specifically with fair- or bad-credit borrowers. Others want good credit or better to let you through the door.
Knowing your general credit tier could help you target the right lenders.
Here's how FICO sorts the ranges:
| FICO range | Tier |
|---|---|
| 800 and up | Exceptional |
| 740 to 799 | Very Good |
| 670 to 739 | Good |
| 580 to 669 | Fair |
| Below 580 | Poor |
Your credit score is only one part of the credit picture. Lenders aren’t just checking your scores—they also look at your credit history as a whole. A history that shows on-time payments and low credit card balances can be just as, if not more, important than the score itself.
But even perfect credit isn’t a guarantee of anything. You could be rejected for a loan if the lender thinks you can’t afford it, regardless of what your credit says.
Pre-qualify before you apply for a personal loan
Many lenders let you check your rates or pre-qualify using a soft credit pull. Unlike a formal application, which triggers a hard credit pull, soft pulls don’t impact your credit score.
This step does two important things:
- Tells you whether you’re likely to be approved
- Let’s you compare realistic rates and fees between lenders
If you’re not in the right credit bracket for a certain lender, the pre-qualification should show you that. This lets you narrow your options without hurting your credit scores on a “no.”
It’s also a chance to find out what interest rate you’d be likely to get if the lender did approve you. Use a soft-pull pre-qualification with two to three lenders and you could get a good idea of what rates to expect when you formally apply.
One caution: Pre-qualification is not a guarantee of final approval or a certain rate. Your final terms come after the lender reviews your full application, and they could differ from the estimate.
How to strengthen your loan approval odds
A few targeted moves before you apply could improve your chances of being approved, especially if your credit is borderline.
If you can, act early. Some of these moves work best if you get started at least a few months before you want to borrow:
- Pay down balances. Reducing high credit card balances could improve your credit scores as well as reduce your DTI.
- Pause new applications. Don’t apply for any new credit before you apply for the loan. The fewer new accounts and recent hard inquiries, the better you typically look as a borrower.
- Figure out exactly how much you need. Don’t borrow more than that. A smaller loan amount is generally an easier yes for a lender.
Depending on the lender, you may also have the option of applying with a cosigner or joint applicant. If your cosigner has good credit, this could improve your approval chances and even get you a better interest rate. It could pose risk for the cosigner if you don’t repay the loan, so have a solid repayment plan in place before you make the ask.
Cosigner and joint-applicant rules vary by lender. Some lenders allow joint applications, and others don't, so check the lender's eligibility page.
Are no-credit-check loans a good option?
No. It may be really tempting to just skip the credit score business entirely if you’re worried about approval. But lenders check your credit for an important reason: to gauge your risk.
Lenders use your credit history to determine how likely you are to repay the loan. Without a credit history to go by, no-credit-check lenders just assume you’re going to be a high risk—and they charge you extra for it.
No-credit-check loans, payday loans, and similar options all share the common trait of very high fees and interest rates. This leads to expensive, unaffordable loans that often leave you worse off than you were before you borrowed.
What to do if you're not approved for a loan
Whether your pre-qualification isn’t approved or your formal application is denied, the next step is the same: figure out why. The answer tells you the solution.
Under the Equal Credit Opportunity Act, the lender must tell you the specific reason your application was denied, in an adverse-action notice. Read it closely.
Once you know what went wrong, you have options:
- Choose a new lender. You could pre-qualify with a few other lenders to see if it’s just a matter of a bad fit or if you need to fix something specific.
- Fix the problem. If multiple lenders won’t pre-qualify you, you may need to work on boosting your credit score or paying down debt to improve your DTI.
- Give it time. Building credit and paying down debt don’t happen overnight.
You can pre-qualify with a soft credit pull with as many lenders as you like, as often as they allow you to do so. This means you could work on your credit and check back in periodically to see if you’ve improved enough for a loan offer after a few months.
Bills Action Plan
- Check your credit score and pull your reports. Fix any errors and note where you rank against the fair and good ranges.
- Prequalify with at least three lenders using their soft-pull tools, then compare estimated APR, fees, and monthly payment side by side.
- If you don’t get pre-qualification approval, improve your application. Pay down what you can to lower your DTI, and give your credit a bit of time to improve. Then check for pre-qualification offers after a little time.
Key Terms
Soft inquiry: A check of your credit that doesn't affect your score. Many lenders offer pre-qualification for personal loans that use a soft credit pull to give you an estimate of your approval and rate.
Hard inquiry: The credit check a lender runs when you formally apply for a loan. It leaves a mark on your report that can lower your score by a few points for a year.
Debt-to-income ratio (DTI): All your monthly debt payments, including housing, divided by your gross monthly income. Lenders use it to gauge whether you can afford a new loan payment.
Pre-qualification: A preview of the rate and terms you might get, usually based on a soft inquiry. Not a final approval.
Origination fee: A fee some lenders charge that's taken out of your loan before you get it. It typically ranges from 0% to 12% depending on the lender and loan terms.
This article is for general education and is not financial advice. Loan approval and terms depend on your individual circumstances and are subject to credit approval. Consider speaking with a qualified professional about your specific situation.
Does checking if I pre-qualify hurt my credit?
Usually not, as long as the lender uses a soft credit pull. A soft inquiry doesn't affect your credit score. Most lenders let you check your rate with a soft pull. Once you formally apply, they’ll check your credit with a hard inquiry that could hurt your score.
Can I get approved with bad credit?
Yes, it’s possible to get a personal loan with bad credit. Some lenders specialize in low-credit borrowers, or you could check with a regional bank or local credit union. Credit unions, in particular, tend to be flexible in credit requirements for members.
Why was my application denied?
Loan applications can be denied for a variety of reasons:
Your credit score isn’t in the desired range
Your income isn’t regular
You carry too much debt already
You have missed payments in your recent credit history
You’ve recently filed for bankruptcy
You asked for too large a loan
In most cases, the lender must send an adverse-action notice that explains the specific reason you weren’t approved. Use it to fix the issue, then pre-qualify again or apply for a smaller amount.