Whether you need cash to consolidate high-interest debt, cover medical bills or fund home renovations, a personal loan can help you meet your financial goals. But before you apply, knowing how to get approved and key requirements for a personal loan can give you an edge when you shop for loan options.
- Many personal-loan lenders require a minimum credit score of at least 580, with a score of 740 or higher unlocking the lowest interest rates.
- Your debt-to-income ratio (DTI) – the percentage of your monthly gross income that goes toward debt payments – is just as important as your credit score in getting approved.
- Gathering the right documents and shopping with multiple lenders can boost your chances and help you get the most competitive personal-loan rates and offers.
What Is A Personal Loan?
A personal loan is money you borrow from a bank, credit union or online lender in a lump sum, and then repay in fixed monthly installments over a set period of time. Most personal loans are unsecured, meaning no collateral is required to borrow the money. They differ from secured debt, such as auto loans or mortgages, where the lender can repossess the asset if you default.
Without collateral, lenders lean heavily on your income, credit history and financial profile to approve you for a personal loan and determine your interest rate. Personal loans often range in term from 12 months – 7 years, with typical amounts starting at $1,000 and going up to $100,000.
Compare Personal Loan Offers From Verified Lenders:
Personal-Loan Requirements: Core Criteria
Most lenders have similar requirements. Here are the key factors they consider.
Credit Score
Your credit score is a major indicator of your creditworthiness and ability to repay a loan. It tells lenders how well you manage debt and whether you’re likely to make on-time payments. The higher your credit score is, the better your approval odds are. You’ll also get a lower interest rate.
Many lenders use credit scores generated by the Fair Isaac Corporation, known as FICO scores, which range from 300 – 850.
| Credit Score Range | Credit Rating | Typical Approval Outcome |
|---|---|---|
| 740 or higher | Very Good/Excellent | Best rates, highest loan amounts, most lender options |
| 670 – 739 | Good | Solid approval odds; competitive rates |
| 580 – 669 | Fair | More limited options; higher interest rates |
| Below 580 | Poor | Lowest approval odds; expect high rates or collateral requirements via secured loan |
In addition to your credit score, lenders pull credit reports from each of three major credit agencies – Equifax, Experian and TransUnion – to check whether you’ve missed monthly payments, the length of your credit history and whether you’ve applied for or opened new accounts recently.
Income
Your income is another key factor in determining whether you can repay your loan. You’ll be asked to submit proof of having reliable, steady income. Although some lenders don’t advertise a minimum requirement, they do weigh your income against how much debt you have and whether your earnings are consistent.
Acceptable income sources typically include:
- W-2 employment, bonuses, commissions, overtime pay
- Self-employment income (usually verified with 2 years of tax returns)
- Rental income
- Social Security or disability benefits
- Pension or retirement income
- Alimony or child support (if disclosed)
Debt-To-Income Ratio
Your debt-to-income ratio (DTI) compares how much you owe each month to your gross monthly income. This tells lenders whether you’re carrying too much debt, which could put you at risk of defaulting if you run into hardship.
DTI is calculated by dividing your total monthly debt payments by gross monthly income, then multiplying by 100. For instance, if you earn $5,000 per month and pay $1,500 toward monthly debt, your DTI is 30%.
Most personal-loan lenders prefer a DTI below 36%, but some allow up to 43% with extenuating circumstances. If you have excellent credit or a high income, some lenders might stretch to as high as 50%.
Work History
Lenders generally look for a stable work history of several months to 2 years. Full-time employment is the easiest to verify, but self-employed borrowers and gig workers can still qualify by providing their tax returns, bank statements and profit-and-loss statements.
If you’re between jobs or recently started a new role, consider waiting a few months before applying for a personal loan to strengthen your approval chances.
U.S. Citizenship Or Residency
Many lenders require you to be a U.S. citizen or permanent resident to qualify for a personal loan. Some online lenders also work with non-permanent residents on valid long-term visas, but this varies widely by lender. You’ll need to verify your citizenship status regardless.
What’s Your Goal?
Buy A Home
Discover mortgage options that fit your unique financial needs.
Refinance
Refinance your mortgage to have more money for what matters.
Tap Into Equity
Use your home’s equity and unlock cash to achieve your goals.
Personal-Loan Documentation Checklist
After you apply, your lender will likely request various documents to verify your identity, income and financial situation.
| Document Type | Examples |
|---|---|
| Proof of identity | Driver’s license, state ID, passport |
| Proof of address | Utility bill, lease agreement, mortgage statement, bank statement |
| Proof of income | Recent pay stubs (30 – 60 days), W-2s, 1099s, bank statements, brokerage account statements, etc. |
| Federal tax returns | From the past 1 – 2 years (especially for self-employed borrowers) |
| Bank statements | The last 2 – 3 months of statements |
| Social Security number | Required for credit check and identity verification |
| Employer details | Name, address and phone number (to check employment status) |
If you’re applying for a secured personal loan backed by collateral like a savings account or vehicle, you’ll also need documentation for that asset, such as a vehicle purchase agreement or bank statement.
How Personal-Loan Lenders Evaluate Your Application
While lenders’ products and guidelines differ, here are a few things that consistently raise red flags in the approval process:
- Insufficient income or work history
- A recent bankruptcy or foreclosure
- Multiple hard credit inquiries within a short period of time
- Missed or late payments
- A thin credit file without a mix of accounts
- A request to borrow more than you can afford to repay
- Using the loan for an unapproved purpose
Get A Personal Loan Today
Find a lender that can help you find the right loan terms for your financial situation.
How To Improve Your Eligibility Before You Apply
Before you take out a personal loan, here are some steps to strengthen your application.
1. Check Your Credit Report
Request your free credit reports from all three major credit bureaus at annualcreditreport.com. Look for any errors, such as accounts that aren’t yours or closed accounts still listed as being active. Disputing and correcting errors with those creditors can help boost your score.
2. Boost Your Credit Score
Your bank or credit card company might provide free access to your credit score, or you can request it from the credit bureaus. Focus on making on-time payments and reducing account balances if your score needs improving.
3. Pay Down Revolving Debt
Lenders pay close attention to your credit utilization rate, or how much of your available credit you’re actually using. Ideally, you should try to pay all account balances below 30% of their available limits, which can simultaneously lift your score and lower your DTI. Even better? Get those balances under 10%, or pay them off completely.
4. Avoid Opening New Accounts Before You Apply
Every time you apply for credit, a hard inquiry pops up on your report. Having several of these inquiries within a short window can lower your score and give lenders pause. Avoid opening a credit card account or taking out a loan in the months before applying for a personal loan.
5. Add A Co-Signer Or Co-Borrower
If you have less-than-stellar credit or a too-high DTI, consider asking a relative or close friend to be a co-signer or co-borrower on your loan. A co-signer vouches for your ability to repay, while a co-borrower can access the loan proceeds and shares repayment responsibility with the primary borrower. With both arrangements, if you default on payments, the co-signer or co-borrower is liable for repayment.
Looking For Access To Money?
Just answer a few simple questions and we’ll help you find the funds you need.
How To Choose The Best Personal Loan
With thousands of institutions to choose from, here are five steps to help you find the right personal loan.
- Figure out how much you need to borrow and what it’s for. Borrowing more than you need incurs higher monthly payments and total interest costs for no reason. While personal loans can be used for many things, they’re not a free-for-all for any expense. Make sure your loan purpose matches the lender’s criteria.
- Compare APRs, not just interest rates. The annual percentage rate (APR) on a loan includes all fees, which gives you a true look at your all-in financing costs.
- Watch for origination fees. Some personal-loan lenders charge these fees (ranging from 1% – 10% of the loan amount) to process your application. Look for lenders that have low or no fees to reduce costs.
- Check the loan term. Longer loan terms may lower your monthly payment, but they will bump up the total interest you’ll end up paying. Choose a loan term and corresponding payment you can actually afford, both now and for the long run.
- Shop with multiple lenders. Compare personal loan rates and terms from big banks, credit unions and online lenders. If you already do business with a financial institution that offers personal loans, start there; you might score better rates, waived fees or more flexible terms. Also, look into getting prequalified with several lenders, which allows you to compare real offers without hard credit inquiries.
FAQ
The Bottom Line: Getting Approved For A Personal Loan Starts With Preparation
Getting approved for a personal loan doesn’t require perfection. It comes down to being prepared and showing lenders you’re a reliable borrower – someone with a steady income who manages their debt, makes on-time payments and fulfills their financial obligations.
Whether it’s for debt consolidation or a big purchase, get a personal loan tailored to your situation.
Deborah Kearns
Deborah Kearns is an award-winning independent journalist with more than 15 years of experience covering real estate, mortgages and personal finance. Her work has appeared in the Wall Street Journal, Kiplinger, U.S. News & World Report, Quartz, CNN, Forbes, Fortune, Newsweek, The Associated Press and dozens of other outlets. She previously led content and communications at a Top 15 national mortgage company and held writing and editing roles at Bankrate, NerdWallet, LendingTree and RE/MAX. She holds a bachelor's degree in journalism from the University of Florida and a master's degree in public relations from Ball State University.
