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How to Apply for a Personal Loan

Personal loans can help you finance a major purchase or consolidate debt. Here’s what you need to know about applying.

People use unsecured personal loans for a variety of reasons - to consolidate debt, pay for a vacation, help finance a major purchase, or remodel.

What Credit Score Is Needed for a Personal Loan?

Your credit score is one of many factors that can be considered in the loan-approval process. Lenders may also look at your credit report (a statement with information about your current credit situation and payment history) as well as your income stability. Your credit score may indicate whether a loan can be approved and how favorable the terms can be.

My Credit Is…

Range

Loan Terms

Excellent

740 to 850

Fairly easy to qualify for the most favorable loan terms

Average

670 to 739

Should be able to qualify for average loan terms

Poor

580 to 669

If you qualify for a loan, interest rates may be very high

Bad

579 and lower

Unlikely to qualify

How much do you have to make to get a personal loan?

Income requirements for personal loans vary by lender. Some lenders recommend a minimum annual income to qualify for a personal loan; others ask for proof of taxable income or require a certain debt-to-income (DTI) ratio. Lenders may also combine these requirements. For example, loan approval may depend on a recommended annual income of $60,000 and a DTI less than 40 percent.

The debt-to-income ratio is a comparison of your monthly debt burden to your gross monthly income. So if your monthly expenses total $1,000 and your gross income is $3,000 per month, your DTI is 30 percent. A DTI of 20 percent or less is considered excellent by most lenders and a DTI of 40 percent or higher may indicate financial hardship.

What information do you need to apply for a personal loan?

You are generally required to supply personal information to your lender to support a personal loan application. The specific documents requested may vary by lender, by loan purpose, and by your employment type. Typically, information is needed to prove your identity and residence, income and expenses, credit history and bank balances. If collateral is required, you may need to supply proof of ownership as well.

This is not an exhaustive list, but it can give you an idea of the types of documents you may need to present to the lender during the loan-approval process:

Category

Information Sought

Documents to Supply

Identity/Residence

Name, address, date of birth

  • Driver's license or state ID
  • Military ID
  • Passport

Income (salaried)

Employer, dates of employment

  • Paycheck stub
  • W-2
  • Tax returns*

Income (self-employed)

Client list, dates of employment

  • Financial statements
  • Tax returns*

Income (other)

Alimony/child support

  • Divorce decree

Expenses

Estimate of monthly expenses

  • Mortgage statements or lease
  • Credit card statements
  • Any loan statements
  • Utility bills
  • Bank statements

Credit History

Credit report authorization

  • SSN

Collateral**

Proof of ownership

  • Deed or title to home
  • Auto or boat title

* Lenders typically ask for your most recent tax return, and may ask to see two years of returns.
**Many personal loans do not require collateral, but some do.

Getting a personal loan to pay off debt

Consolidating debt is one of the most common reasons to pursue a personal loan. Review our debt consolidation article to understand how to do this effectively.

This personal loan section contains many current articles to help you successfully apply for and use personal loans.

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