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How to get a personal loan – an easy step-by-step guide

How to get a personal loan
Betsalel Cohen
UpdatedMar 8, 2024
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    4 min read
Key Takeaways:
  • Know your budget: Check your credit score (optional) and plan how much you can afford to repay.
  • Shop around: Compare loan offers from different lenders to find the best deal.
  • Borrow responsibly: Understand the loan agreement and only borrow what you truly need.

Getting a personal loan doesn't need to be complicated? You can even do it from the comfort of your home.

Personal loans are a popular financial tool. They come in handy if you want to consolidate debt, make home improvements, or pay for an unexpected emergency. With online lenders, they are now more available and easier to get.

This step-by-step guide will make it even easier.

The 6 steps to get a personal loan

1Check your credit score
2Budget and figure out how much you need
3Shop around and compare lenders
4Get prequalified
5Gather documents and apply for the loan
6Review and understand the loan agreement

Step 1: (Maybe) check your credit score

Do you really need to check your credit score before shopping for a personal loan? Actually, the answer is no. However, many online lenders will ask for an estimate. And the interest rate they offer is going to be different.

Credit scores are a common tool for lenders to decide if you're a reliable borrower. A good score typically means better loan terms. Knowing your credit score is helpful. If your credit score isn't great, you may be able to make it better. You can do this by disputing items or taking steps to improve your credit over time.

Many credit card issuers offer free credit score access to their cardholders, making it a convenient way to check your score. These scores might be FICO or VantageScore models. While not all issuers offer this benefit, it's becoming increasingly common. Checking your score usually involves logging into your account online and can be done in under five minutes.

>>Tip: Don't want to check your credit? Get a loan offer from an approved personal loan provider to check to get prequalified for a loan without checking your credit

What if you have bad credit? Don't despair. One popular solution is a personal loan with a co-borrower. Some lenders, like Achieve, will approve your loan request if you add a co-borrower. A co-borrower is someone with good credit who agrees to pay back the loan if you can't.

If you can't get approved due to bad credit, or the interest rates are too high, then consider speaking to a credit or debt counselor. They may be able to offer a different program, like a debt settlement or debt management plan.

Step 2: Budget and figure out how much you need

Before borrowing, creating a budget helps you avoid overspending and ensures you can comfortably afford the loan payments. Budgeting involves tracking your income and expenses to see how much you can realistically allocate toward the loan each month.

Creating a budget is easier than ever with numerous popular budgeting apps and online tools available. Popular options include MOLO, Mint, and YNAB. These tools help you categorize your income and expenses, track spending patterns, and identify areas for potential savings.

Keep in mind that the length of your loan (time to repay) greatly affects how much you pay each month. Generally, shorter terms have higher monthly payments but less interest in total. On the other hand, longer terms have lower monthly payments but accumulate more interest over the loan. Select a loan term that finds a balance between what you can afford and your repayment objectives.

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Shop around and compare lenders:

Different places like banks, credit unions, and online sites offer personal loans. They all have their own rules about how much they'll charge you (that's the interest rate) and how long you have to pay them back (those are the terms). It's smart to check out a few different options to discover who gives you the best deal.

How long does it take to get a personal loan? The timeframe can vary depending on the lender, but it usually takes a few business days to a week after applying.)

Tip: Use the personal loan rate table to check offers and get prequalified.

Step 4: Get prequalified for a personal loan

Before formally applying for a loan, consider getting prequalified. This allows you to discover estimated loan terms (like interest rates and payment amounts) without affecting your credit score.

Many online lenders offer prequalification. Here's how it works:

  1. You'll answer questions and provide basic information.
  2. The lender performs a soft credit check. This doesn't impact your score.
  3. Based on your information, they'll give you a prequalification offer. This is an estimate, not a guaranteed approval.

Prequalification helps you:

  • Discover if you might qualify for a loan.
  • Compare offers from different lenders.
  • Choose the loan option that best suits your needs.

It's a quick and easy step to take before committing to a full application.

Step 5: Gather Documents and Apply for the Loan:

Before applying, make sure you have these things ready:

  • Your ID: Driver's license or passport
  • Proof of income: recent pay stubs or tax returns
  • Other documents: Including bank statements, proof of address, and whatever else your lender asks for

It's important to respond to the lender's questions with honesty and provide complete information to avoid any delays in your application process.

Here's what to keep in mind:

  • Organize your documents: Keeping your documents organized can speed up the application process. Make a checklist of what's needed and tick each off as you gather them.
  • Accuracy is key: Make sure all the information you provide is accurate to prevent any potential issues with your application.
  • Follow the lender's instructions: Each lender might have slightly different requirements. Pay close attention to their instructions to make sure you submit everything correctly.

Taking these steps can help streamline your loan application process, making it smoother and potentially faster to get approval.

Step 6:. Review and understand the loan agreement

Before signing on the dotted line, take your time to thoroughly read and understand every aspect of the loan agreement. This is crucial to avoid any surprises down the road. Pay close attention to:

  • Interest rate: This is the cost of borrowing the money, expressed as a percentage of the loan amount.
  • Repayment terms: This includes the loan term (how long you have to repay) and the monthly payment amount.
  • Fees: Be aware of potential hidden fees, such as origination fees (charged for processing the loan) or late-payment fees. Remember, late payments can also damage your credit score and lead to additional penalties.

Borrowing responsibly is key. Only borrow what you truly need and can comfortably afford to repay on time. Making your payments on time is essential for maintaining a good credit score, which can benefit you in securing favorable loan options in the future.

By following these steps and taking the time to understand your loan agreement, getting a personal loan can be a straightforward process. This way, you'll find the loan that fits your needs and keeps things smooth.

Frequently Asked Questions

Do I need to have a job to get a personal loan?


You usually need a job or a regular source of income to get a personal loan. This is because lenders want to make sure you can pay back the loan. But it's not the only thing they look at. If you have other ways to make money (like getting retirement benefits, investments, or rental income) or can find someone with a steady job to co-sign the loan, you might still get a personal loan.

Can I get a personal loan with bad credit?


Sure, getting a personal loan is possible even with bad credit. But you may have fewer options and less favorable terms, like higher interest rates. Some lenders focus on giving loans to people with bad credit. Others offer secured loans, which require collateral like a car or house. These loans may be more accessible, even for those with low credit scores. Adding a co-signer with good credit can also improve your chances of getting approved and help you get better loan terms.

How long does it take to get approved for a personal loan?


The approval time for a personal loan can vary widely depending on the lender. Some online lenders can process your application and decide within a day or two, with funds being disbursed shortly after approval. Traditional banks and credit unions might take longer, anywhere from a few days to weeks. Prequalification steps can provide a quicker glimpse into your potential approval and terms without affecting your credit score.