How to Get Approved for a Personal Loan
Personal loans can be a great financial resource for individuals who need cash quickly for a major personal expense.
However, generally speaking, it’s only worth it if you’re able to be approved for a loan with reasonable interest rates and terms.
So, before you apply, make you understand the steps you need to take to get approved for a personal loan.
Getting Your Personal Loan Approved
There’s no way to guarantee that your application is approved, but there are a few steps you can take to increase your chances by as much as possible.
So, when shopping for lenders, make sure to keep these tips in mind.
Know Your Credit Score
First, be sure to review your credit report as your credit score is the main factor for lenders when determining your eligibility.
Generally speaking, you’ll need a score of at least 640 to qualify for reasonable rates and terms. However, if your score is below this, you still may be able to qualify for fair rates — you just might have to put up collateral to do so.
By reviewing your credit report, you can not only know what rates to expect, but you can also look for any errors and dispute them before submitting a loan application.
Your debt-to-income ratio represents your current income compared to your outstanding debts. Lenders use this metric to see whether or not you can actually afford your payments.
Typically, you’ll need a debt-to-income ratio of 35% or lower to qualify for good terms. If you don’t meet this benchmark, you may need to reduce your other debt balances before applying for a personal loan.
Compare Lenders & Apply
If your finances are in good standing and you're ready to apply, the first step is to compare eligibility requirements, rates, and terms from multiple lenders.
Get pre-approved so that you can compare quotes without impacting your credit score. Once you find a few suitable lenders, it’s time to submit your applications.
You’ll likely need the following documents (among others, depending on what your lender requires):
● Bank statements
● Pay stubs
● Tax returns
● Employment history
● And more
After your applications are approved, you can compare your offers and choose the one that best meets your needs.
Based on a $10,000 loan, excellent credit score with a 14% interest rate on a 1 year term