How To Ask for a Loan From a Bank
Written by
Jeanine Skowronski
Edited by
Melanie Grafil
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Asking for a personal loan from a bank is relatively easy. All you need to do is clearly and confidently explain your financing needs, provide your personal and financial documents and demonstrate your creditworthiness — i.e., your ability to repay the funds as agreed.
Traditional banks typically offer personal loans somewhere between $1,000 and $50,000, with repayment terms of one to five years. However, their underwriting standards are often more stringent than those of online or alternative lenders, so if you’re hoping to borrow from a bank, you’ll benefit from a plan. Learn how to ask for a loan from a bank.
How To Ask for a Loan From the Bank: 4 Steps To Follow
Asking for a bank loan is a relatively straightforward process, particularly if you have a strong applicant profile.
- Apply online or schedule an in-person meeting with a loan officer to discuss your options. Be sure to have your personal information and specific loan request ready, as incomplete applications can lead to logjams and denials.
- Be honest and confident when you explain your needs. Be sure your request aligns with the bank’s lending criteria. For instance, it may have minimum or maximum borrowing amounts and restrictions on how you can use funds.
- Share your repayment plan. A bank wants to know you’ll honor your loan agreement, so make sure you’ve got documents to show proof of income, especially if you’re self-employed or your pay fluctuates.
- Ask about loan terms, interest rates and fees. Consider prequalification. That’s where the bank conducts a soft credit check to provide you with conditional approval and rate estimates. This step allows you to rate-shop without hurting your credit score. It can also expedite the entire application process.
“Lenders like to see that you’re prepared, responsible, and financially stable,” said Brian Samelko, vice president of personal lending at PNC Bank. “I’d recommend doing your research. Know what the current average interest rates are so that you can spot a fair offer.”
What Banks Look at Before Giving You a Loan
Understanding how a bank assesses your loan application can increase your odds of success. Here’s how bank loans work.
Credit Score and Credit History
Most banks require at least fair credit — scores between 580 and 660 — for personal loans, while very-good-to-excellent credit scores of 740 or higher can up your approval odds and get you more favorable loan terms.
Your Income and Job Stability
Some banks have hard income requirements for personal loans. For instance, you might need a minimum individual or household annual income of $25,000. Others will look for a steady stream of income, consistent employment and earnings that justify the requested loan amount.
You’ll have to provide recent pay stubs, W-2s, tax returns and other employment verification as part of your loan application.
Existing Debts
Even applicants with good credit can face rejection if their debt-to-income (DTI) ratio is too high. DTI measures what you owe creditors against your gross monthly income. Banks prefer a DTI of at least 36%, but the lower, the better.
Loan Purpose
A bank will ask what you plan to use the loan for, and it may prohibit specific use cases. Obviously, you can’t use the personal loan to make illegal purchases. Beyond that, banks commonly restrict its use for college tuition, student loans, housing down payments and investments.
Collateral
If your financial profile is spotty or you’re applying for a large loan, lenders might require collateral — that is, a personal asset you offer to secure the loan. Common types of collateral include vehicles, cash deposits, precious metals or collectibles.
Common Mistakes To Avoid When Asking for a Loan
These common mistakes can lower your approval odds or lead to unfavorable loan terms.
Not Checking Your Credit Report
The information on your credit report is used to make up your credit score. Errors can hurt your overall score. If you aren’t aware of any errors, you’ll need to clean them up — a surprise collection account, for instance, can unexpectedly deny your loan application.
“If you spot inaccuracies, take the necessary steps to dispute them with the credit bureaus,” Samelko said.
Asking for Too Much Money
Banks cap their loan amounts, so if you’re asking for more than they’re willing to lend, it’ll likely to be denied. Your odds of success are also low if you’re asking for more than you reasonably afford to repay.
One mistake “I see [is] taking out more money than is really needed for the purchase, resulting in a higher debt-to-income and larger payments,” said Hugh Steven Morris, Chartered Retirement Planning Counselor (CRPC) and president at The Morris Group.
Applying at Too Many Banks at Once
Loan applications can generate a hard inquiry on your credit report, and too many in a short time frame can hurt your credit score. Plus, lenders sometimes view multiple inquiries as a red flag in isolation, as they suggest you’re overextending yourself or looking to finance items you can’t repay.
Ignoring Loan Terms and the Fine Print
Ensure you understand when payments begin, the total interest you’ll pay over the loan’s life, and whether the loan incurs additional fees or prepayment penalties.
“Some lenders charge hefty origination or processing fees, while others don’t charge any,” Samelko said.
Look for default clauses that explain what the bank will do if your loan becomes delinquent.
Failing To Make Improvements Before Reapplying
All banks have different lending standards. However, applicants with poor credit or insufficient income face low approval odds or unfavorable rates, unless there are material changes to their profiles.
You can improve your credit by lowering high outstanding balances, disputing credit report errors and paying off collections. If you lack sufficient income, consider a side gig or a cosigner to help you secure a loan.
Comparing Loan Options From Different Banks
When comparing offers across banks, consider key loan terms, including annual percentage rates (APRs), repayment terms, fees and penalties and your total monthly payment. The chart below compares some of the best banks for personal loans.
| Bank | Amount | Terms | APR | Prepayment Penalty? |
|---|---|---|---|---|
| Citi® | $2,000 to $30,000 | 12 to 60 months | 8.99% to 19.49% | No |
| TD Bank | $2,000 to $50,000 | 36 to 60 months | 8.99% to 23.99% | No |
| Wells Fargo[21] | $3,000 to $100,000 | 12 to 84 months | 6.74% to 23.99% | No |
What To Do If the Bank Says No
Here’s how to get a personal loan if a bank denies your application.
Ask Why You Were Denied
Federal law requires a lender to provide a written explanation of why they denied your loan, usually within 30 days. You can ask a bank for more information upfront, though. That way, you can take steps to improve your applicant profile and better your odds of getting financing in the short or long term.
Try a Different Bank or Credit Union
Financial institutions don’t all use the same loan criteria or underwriting standards, so you could get approved if you apply at one known to work with your financial profile. Some credit unions have more flexible lending standards for their members, for instance. Take a look at personal loan offers at these top credit unions.
Consider Alternative Lenders
“Some online lenders may be willing to take the chance,” Morris said, as these lenders are usually “not as strict as the brick-and-mortar big banks.”
Other alternatives include peer-to-peer (P2P) marketplaces and cash advance apps. Learn more about where you can get a personal loan.
FAQs About How To Get a Loan From the Bank
Asking for a bank loan can bring up many questions. Here are answers to some common ones.- How much income do I need to qualify for a loan?
- Loan income requirements vary by company, lender type, and loan amount. While some lenders have minimum income requirements, others will consider whether your income and current financial obligations can comfortably cover the new monthly payment. Banks often require a debt-to-income ratio of at least 36%.
- Can I get a bank loan with bad credit?
- You can get a bank loan with bad credit, but you'll likely receive subpar interest rates and terms. You might also need to secure the loan with collateral or have a co-signer to get the financing.
- How long does it take to get approved?
- Traditional banks typically take between one and seven business days to approve and disburse personal loan funds. Some banks will move more quickly if you already have a pre-existing relationship with them.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
