How to get a personal loan in 6 steps
After figuring out how much you need to borrow, comparison shop with various lenders and prequalify for loans without commitment.
When cash is tight, a personal loan can help you pay bills, refinance high-interest debt, or finance an unexpected expense, like an emergency vet bill or auto repair. If you know how to get a personal loan, it can streamline the process and keep you from falling deeper in debt.
1. Determine how much you need to borrow
Since you pay interest on personal loans, it’s important that you don’t borrow more than you need.
In addition to interest, some personal loan lenders charge an origination fee or other upfront fees, which covers the processing of your loan application. Lenders subtract the origination fee from the amount you borrow, so the amount it disburses will be less than what you applied for. For example, if you borrow $3,000 but the lender charges a 5% origination fee, that’s $150. You’d receive $2,850 as your loan amount but would repay the full $3,000, plus interest.
The total cost to borrow, inclusive of upfront fees, is represented by the annual percentage rate (APR).
The APR, along with the amount you borrow determines your monthly payment, as does the repayment term. The longer the repayment term, the lower the monthly payments (though you’ll pay more in interest over the life of the loan). If you opt for a shorter repayment term, your monthly payments will be higher but the overall cost of the loan will be lower.
Check out: Best personal loan rates
2. Check your credit
Your credit score signals to lenders how reliable you are when repaying debts — the higher your score, the better your reputation. You’ll also typically qualify for better APRs on personal loans.
Finding out your score will let you know where you stand, since many lenders disclose their minimum credit score requirements. Typically, most lenders prefer FICO scores above 670. But there are lenders who specialize in lending to borrowers with less than ideal credit.
FICO credit scores fall within these ranges:
- Poor: Below 580
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- 800 and above
You can pull your credit score for free weekly from AnnualCreditReport.com. Check your credit report for any errors. If you find mistakes, report them to the appropriate credit bureau (Equifax, Experian, or TransUnion) as they could be dragging down your score.
Check out: How to pay off debt fast
3. Compare personal loan lenders
Once you know your credit score, you can use it to narrow down your lending options. You can get personal loans from banks, credit unions, and online lenders, but it’s important to shop around to make sure you’re getting the best terms.
Here are some factors to consider when comparing lenders:
- Loan amounts
- Interest rates
- Repayment terms
- Fees
- Discounts
- Minimum credit score
- Lender reputation
- Cosigner acceptance
Check out: Best online loans
Fox Money rating
Fixed (APR)
6.99% - 25.49%
Loan Amounts
$5000 to $100000
Min. Credit Score
700
Fox Money rating
Fixed (APR)
7.80% - 35.99%
Loan Amounts
$1000 to $50000
Min. Credit Score
620
Fox Money rating
Fixed (APR)
-
Loan Amounts
$2500 to $40000
Min. Credit Score
660
Fox Money rating
Fixed (APR)
8.49% - 17.99%
Loan Amounts
$600 to $50000
Min. Credit Score
760
Fox Money rating
Fixed (APR)
8.49% - 35.99%
Loan Amounts
$1000 to $50000
Min. Credit Score
600
Fox Money rating
Fixed (APR)
8.98% - 35.99%
Loan Amounts
$1000 to $40000
Min. Credit Score
660
Fox Money rating
Fixed (APR)
8.99% - 29.99%
Loan Amounts
$5000 to $100000
Min. Credit Score
Does not disclose
Fox Money rating
Fixed (APR)
8.99% - 35.99%
Loan Amounts
$2000 to $50000
Min. Credit Score
600
Fox Money rating
Fixed (APR)
9.95% - 35.99%
Loan Amounts
$2000 to $35000
Min. Credit Score
550
Fox Money rating
Fixed (APR)
-
Loan Amounts
$5000 to $35000
Min. Credit Score
700
Fox Money rating
Fixed (APR)
11.69% - 35.99%
Loan Amounts
$1000 to $50000
Min. Credit Score
560
Fox Money rating
Fixed (APR)
11.72% - 17.99%
Loan Amounts
$3000 to $40000
Min. Credit Score
640
Fox Money rating
Fixed (APR)
-
Loan Amounts
$20000 to $200000
Min. Credit Score
660
Fox Money rating
Fixed (APR)
14.30% - 35.99%
Loan Amounts
$3500 to $40000
Min. Credit Score
640
Fox Money rating
Fixed (APR)
18.00% - 35.99%
Loan Amounts
$1500 to $20000
Min. Credit Score
540
Fox Business does not make or arrange loans.
4. Prequalify for loans
Prequalifying for loans lets you compare loan estimates from different lenders. It doesn’t involve a hard credit inquiry (also known as a hard credit check), so it won’t affect your score. Just know that it's not an offer of credit and your credit score may temporarily dip once you apply for a loan.
It’s a good idea to prequalify for loans so you have a better idea of the loan offers you’d receive before you apply. To prequalify, you’ll simply need to fill out and submit a form with your information. Note that prequalification does not represent an offer of credit, and the final rate you receive will likely be much higher.
Learn more: What is personal loan pre-approval?
5. Apply for the loan
Once you’ve compared at least a few lenders, pick one and fill out a formal loan application. When you apply, you’ll need to provide your personal information, such as your name, phone number, and address. You’ll likely also need to supply your job and income information. A lender may require you to submit copies of your recent pay stubs or W-2 forms as proof of your income.
While prequalifying is a soft pull on your credit, a loan application is a hard pull. A hard credit inquiry is a full credit check, and it’ll affect your credit score. That’s because it shows you’re actively seeking credit. However, your FICO credit score will likely drop by less than five points, and hard inquiries will only factor into your credit score for one year.
Because each loan application causes a hard pull on your credit, it’s best not to apply with a bunch of different lenders at different times. Instead, if you apply with more than one lender, do so within 14 to 45 days — FICO will recognize this short-term pattern as you shopping for one loan.
Ideally, though, it’s best to prequalify, compare your rates, and then pick one lender and apply with that one.
6. Receive your loan funds
Once you apply, the lender will review your application and check your credit. It can take several days to get approved for your loan, although some lenders may be able to approve you the same day, especially if you prequalified.
When you receive your approval, you’ll need to sign your loan documents so you can receive your funds. Then your lender can deliver your loan funds directly into your bank account (or by check or debit card) within one day to a week. The timing depends on the lender. You may even be able to get the funds the same day.
Next, you simply start repaying your loan. Your lender will provide you with all of the loan details, including the payment date. You generally repay personal loans in monthly installments.
Check out: Best fast personal loans
FAQ
Can you get a personal loan with bad credit?
Yes, you can get a personal loan with bad credit. It’ll likely be more challenging (and expensive) than it is for someone with strong credit, because many lenders have minimum credit score requirements that are in the good to excellent range. But there are lenders who specialize in lending to borrowers with bad or fair credit. These lenders take other factors into consideration when reviewing your loan application, such as your education or employment history.
What happens if a lender doesn’t approve your application?
While nobody wants this outcome, it’s possible for a lender to reject your loan application. If that happens, you have a few options:
- Apply with another lender if you need the funds right away. But keep in mind there’s no guarantee you'll get approval.
- Find a cosigner with strong credit, which may improve your approval odds. You’ll typically also qualify for better rates this way. (A cosigner agrees to be held responsible for repayment if you can’t manage the monthly dues on your own.)
- Improve your credit score, which can boost your chances of approval when you apply later.
Check out: Best personal loans with a cosigner
Some things you can do to improve your credit score include:
- Pay every bill on time.
- Pay down balances to keep your credit usage (or credit utilization ratio) under 30%. Your credit utilization ratio is your total monthly debt payments divided by your gross monthly income. For example, if you have $2,000 in monthly debt payments and a gross monthly income of $5,000, your credit utilization ratio is 40% (2,000/5,000 = 0.4).
- Review your credit report for errors, and dispute any mistakes.
- Only apply for new credit accounts when you really need them.
A personal loan can be a useful tool to finance large or unexpected expenses. And when you make your personal loan payments regularly and on time, it can even help you improve your credit.
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