How To Get a Personal Loan: A Step-By-Step Guide to Approval

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

Personal loans can be used for a variety of expenses and typically have lower interest rates than credit cards. Before applying for a personal loan, it’s helpful to know what to expect. Here’s a step-by-step guide to personal loan approval.

Getting a Personal Loan in 8 Steps

1. Determine How Much You Need To Borrow

Borrowing too little could prevent you from covering the expense you’re borrowing money to pay, but too large a loan will cost you unnecessary interest and fees. So for a first step, look at the reason for your loan, whether it’s to consolidate debt, pay medical expenses, finance home improvements or get you through an emergency. Then calculate how much you’ll need to meet your goal.

2. Check Your Credit Score

Your credit score impacts your ability to get a loan and how much you’ll pay for it.

Kyle Enright, president of Achieve Loans, said credit score requirements differ by lender. “In general, the higher the applicant’s credit score, the lower the interest rate offered,” he said. “For Achieve’s personal loans, borrowers should have a minimum credit score of 620, for example, but there are many lenders who will lend to a consumer even with a poor credit score.” Enright said in these cases, interest rates will be high. 

To maximize your credit score before you apply, review copies of all three credit reports — Experian, Equifax and TransUnion — to look for errors and forgotten collection accounts. Then dispute the inaccuracies and take care of any old debts that could affect your score.

Once your credit reports are in good shape, request your credit score from FICO or another source so you know where you stand before you apply.

3. Compare Lenders and Loan Terms

The next step is to research lenders, including banks, credit unions and online lenders, to see which one is the best match for you. Make note of the lenders’ published rates, fees, loan terms and eligibility requirements.

Here’s a comparison of some top lenders, including rates, loan amounts and more.

4. Get Prequalified for the Loan

Many lenders allow you to prequalify for a loan by providing some basic information about yourself, your income and your credit. As long as the prequalification relies on information you provide rather than information in your credit report, your prequalification request won’t impact your credit.

It will get you an estimate of the rate and origination fees you can expect to pay, though. If you request prequalification from several lenders, you can compare the loans to find the one with the best combination of rates, fees and available terms.

5. Gather Required Documents

Once you’ve selected the best loan, you’ll have to fill out an application. The lender will verify the information you provided in your prequalification request by pulling your credit report and reviewing your financial documents, which you should have ready before applying. For example:

• Recent pay stubs
• Tax returns
• Bank statements or other sources of income
• Benefits statements
• Employment verification
• Government-issued ID such as a driver’s license or passport

The lender will use your credit report to identify your debts and your debt payments and verify that the Social Security number you provided is correct.

6. Submit Your Loan Application

You can submit your loan application in person if you’re using a local lender. Otherwise, apply online or by phone. Double-check your application to make sure that the information is correct. Otherwise, loan processing could be delayed while you work with the lender to correct mistakes or add missing information.

7. Review Loan Terms and Accept the Offer

Review your loan documents carefully before accepting the offer. Check origination and other fees, the interest rate, payment amount and repayment period. Also, note whether you’ll have to pay a penalty if you want to pay the loan off early.

If everything looks good, sign the loan documents to accept the loan. Otherwise, consider negotiating with the lender or applying for a loan with a different lender.

8. Receive Funds and Start Repayment

Lenders usually fund loans within one to five business days. Double-check the due date of your first payment. It could be 30 days after finalizing the loan or 30 days after you received the funds. Setting up autopay or payment reminders will help you avoid overdue payments and late fees.

Types of Personal Loans

Several different types of personal loans are available.

1. Secured Personal Loans

Secured personal loans require collateral such as a car, savings account or even cabinets and other permanent fixtures in your home. They’re often geared toward borrowers with limited or damaged credit. While those secured by a savings account at the same financial institution might have low rates because the lender simply takes the cash from your account if you default on the loan, car title and other secured loans often have high interest rates and high fees.

2. Unsecured Personal Loans

An unsecured personal loan doesn’t require collateral. Instead, the lender bases its approval on the strength of your credit, income and debt-to-income ratio. Rates are usually higher than loans secured by savings accounts, but you won’t have to risk your account or personal property.

3. Fixed-Rate Personal Loans

Most personal loans have fixed rates. That is, the rate and payment stay the same for the entire loan term.

4. Variable-Rate Personal Loans

Variable-rate personal loans start with a fixed rate for a set period. After that, the rate, and therefore the payment, can increase or decrease periodically, based on the benchmark rate. Few lenders offer variable-rate personal loans.

5. Debt Consolidation Loans

Although any personal loan can be used to pay off credit cards or other high-interest-rate debt, some lenders specifically market their loans as debt consolidation loans. Debt consolidation might be beneficial if your loan rate is lower than your credit card rates and you want to eliminate your debt with a single payment each month.

Good To Know

Many personal loan types fall into more than one category. For example, your secured or unsecured loan is likely to also be a fixed-rate loan, and you can use it for debt consolidation.

Secured vs. Unsecured Personal Loans

Here’s a summary of how secured and unsecured loans compare.

Pros and Cons of Getting a Personal Loan

Consider the benefits and drawbacks of personal loans before you apply.

Pros

• Can be used for nearly any expense
• Usually has a fixed rate, which is easier to budget for
• Might offer lower interest rates than credit cards

Cons

• Interest and fees can add up
• Missed payments can hurt your credit
• Some loans require collateral or a strong credit score

Tips for Getting Approved for a Personal Loan

• Improve your credit before you apply by paying bills on time and avoiding taking out new debt until you’re ready to apply for your personal loan. Also, check your credit report in case it has errors or outdated information that needs correcting.
• Pay down existing debt to reduce your debt-to-income ratio.
• Choose a loan amount that fits your budget.
• Consider applying with a co-signer if your credit is low.

Final Thoughts: Finding the Right Personal Loan

Even though going through the steps of getting a personal loan isn’t difficult, it is a process. It’s important to review your credit, continue paying your bills on time and compare lenders to find one that best matches your financial goals before applying.

Cynthia Measom contributed to the reporting for this article.

Rates and fees are subject to change. Information is accurate as of April 7, 2025.

The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.

Share This Article: