Step-By-Step Checklist to Getting a Personal Loan

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Whether you need to consolidate credit card debt, cover unexpected medical bills or pay for personal events such as a wedding, a personal loan can help. Personal loans are a type of installment credit, meaning you borrow a fixed sum and pay it off over time in fixed monthly payments. They are typically unsecured, so they don't require collateral, and can be used for almost any purpose you want.

Follow the steps in this checklist to get ready to apply for a personal loan, choose the right lender, and get approved so you can get the money you need.

Get Ready to Apply for a Personal Loan

  • Decide how much money you need. Try not to borrow more than you need, since you'll be on the hook for the entire amount whether you use it all or not.
  • Check your credit score. If your FICO® Score is 670 or higher, you'll be able to choose from more lenders and get better loan terms and lower interest rates. If your credit score lower, take steps to improve it quickly:
    • Pay down credit card balances.
    • Pay any past-due amounts and make all payments on time going forward.
    • Don't apply for other new credit.
    • Sign up for Experian Boost®ø for free to get credit for on-time telecom, utility and Netflix® payments.

      If you can't improve your credit score quickly and need the loan fast, consider getting a cosigner (if the lender allows one).

  • Review your credit report. Negative marks such as bankruptcy, collection accounts and late payments could make it harder to get a personal loan. If you believe any information on your credit report is incorrect, dispute it with the appropriate credit bureau. Even removing one incorrectly reported late payment could help your score.
  • Assess your DTI. Your debt-to-income ratio (DTI) measures how much debt you're carrying relative to your income. The lower your DTI, the more attractive you are to lenders.
    • To calculate your DTI, divide your total recurring monthly debt (credit cards, mortgage, auto loan, student loan and so on) by your gross monthly income before taxes and withholding.
    • Lenders prefer a DTI of 36% or less, but may approve borrowers with higher ratios. If your DTI is too high, pay down some of your debt before applying for a personal loan.
  • Research personal loan interest rates. The interest you'll pay on a personal loan is expressed as an APR (annual percentage rate) and includes fees and other costs. Lenders generally publish their current APRs as a range, such as 5.99% - 18.25%.
  • Estimate your monthly loan payments. A personal loan calculator can help you calculate monthly payments as well as the total interest you'll pay over the life of a loan.

Personal Loan Calculator

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

  • Decide what size loan payment you can afford. Review your budget to see how much you can afford to pay each month.
    • You can reduce monthly payments by getting a longer-term loan, but you will pay more in interest over time.
    • You will save on interest by taking the shortest-term loan with payments you can afford.

Decide Where to Apply for a Personal Loan

  • Shop around. Every lender considers factors such as your income, credit score and credit history differently. Comparing multiple loan offers will help you get the best loan.
  • Start with your current bank. As an existing customer, you may get better loan terms from your bank than you would elsewhere. You can also research personal loan offers from other banks.
  • Research credit unions. Credit unions may offer more lenient loan terms than traditional bank lenders. However, you need to be a member of the credit union to apply for a loan, which usually involves opening a deposit account.
  • Research online lenders. Online lenders can offer easier applications, faster approvals and more flexible qualification requirements. You can use Experian CreditMatch™ to compare loan offers from several online lenders.

    Here are some online lenders and marketplaces to consider:

    • SoFi: Loans from $5,000 to $100,000, good credit or better recommended
    • Payoff: Loans from $5,000 to $35,000, can only be used for credit card consolidation, good credit or better recommended
    • Upstart: Loans from $1,000 to $50,000, may not require credit history, fair credit considered
    • LendingClub: Loans from $1,000 to $40,000, good for debt consolidation, fair credit considered
    • LendingPoint: Loans from $2,000 to $36,500, fair credit considered
    • Avant: Loans from $2,000 to $15,000, fair credit considered
  • Compare loan terms from different lenders. Get the following information for each lender:
    • Interest rate (APR) range
    • Estimated monthly payment amount
    • Loan terms available
    • Any restrictions on use of money
    • Fees and penalties
    • Discounts or special offers
    • How soon you can receive funds
    • Some lenders offer prequalification for personal loans. Once you're prequalified, you'll get more details about loans you qualify for.
  • Decide which lenders to apply to. Based on your research, select several lenders that seem appealing. Applying for a loan can generate a hard inquiry on your credit report. Too many hard inquiries may lower your credit score, but hard inquiries for the same type of credit within a short time are generally considered one hard inquiry.

Apply for a Personal Loan

In most cases, you can apply for a personal loan online.

  • Be ready to provide basic identification information:
    • Name
    • Birthdate
    • Address
    • Phone number
    • Email address
    • Social Security number
  • Also have the following information at hand:
    • Desired loan amount, term and purpose. Some lenders charge an origination fee that may be rolled into your loan or taken out of your loan amount. Take this into account when requesting a loan.
    • Driver's license or other government-issued identification
    • Employer name and contact information
    • Gross monthly income and sources of income
    • Monthly rent/mortgage payment
    • Total monthly debt payments
  • After you submit your application, the lender may want documentation such as:
    • Recent pay stubs or W-2 forms
    • Most recent tax returns
    • Most recent bank statements
    • Proof of residence such as a utility bill
    • ID card
    • Social Security card

Review Offers and Accept the Loan

  • Decide whether to accept or decline the offer. If you're approved for multiple loans, compare terms to find the best one.
  • Accept the offer you want and get your money.
    • You may receive a check, cash or direct deposit to your bank account.
    • For a debt consolidation loan, the lender may send the money directly to your creditors.
  • Make payments on your loan.
    • Note your payment due date (usually within 30 days of loan approval).
    • Set up automatic payments and be sure your bank account always has enough money to cover the payment.
    • Build the payment into your budget.
    • Use the loan for its intended purpose.
    • If you got a debt consolidation loan, create a budget so you don't rack up new debt.

Know How a Personal Loan Affects Your Credit Score

Making loan payments on time and in full until your loan is paid off can improve your credit score. However, missing a payment, paying late or defaulting on the loan can lower your credit score. Other ways a personal loan can affect your credit score:

  • Credit mix: If you don't currently have an installment loan, a personal loan will increase the types of credit you manage and could improve your credit score.
  • Credit utilization: Paying off credit card debt with a personal loan can lower your credit utilization ratio, which could improve your credit score.
  • Credit history: If you're trying to build a credit history, don't pay the loan off early. Doing so will close the account on your credit report, which could lower your credit score.

Consider monitoring your credit for free through Experian to see how your loan impacts your credit going forward.

Learn More About Personal Loans