How to get a personal loan in 7 easy steps

Follow these recommendations to ensure you get the right personal loan that fits your financial needs. (iStock)

A personal loan is a type of loan that you can use for just about anything you want. You can apply for a personal loan online, over the phone or in your local bank or credit union branch. To speed up the process, here are seven steps for how to get a personal loan when you need it.

1. Determine your need

Take some time to think about your reasons for getting a personal loan and whether it’s a necessary financial move. Personal loans can carry high interest rates, and borrowing money when you don’t need to can threaten your financial health.

“One of the things that we see a primary use for a personal loan is debt consolidation,” said Mark Victoria, head of unsecured lending at TD Bank. “So many consumers will have credit card debt revolving at high interest rates, so a personal loan is a great option to consolidate that debt into a lower interest rate and fixed payment.”

2. Check your credit score

You can get approved for a personal loan even if you have bad credit, but the higher your credit score is, the better. You can check your FICO credit score for free with Experian or Discover Credit Scorecard.

Personal loans typically require a good credit score or better, which typically means a FICO score of at least 670.


3. Check your credit report

If your credit needs some work, check your credit report for free via to determine which areas you need to address.

“I want to make sure that my credit report is accurate and up to date before I apply for credit,” said Victoria. If you see some inaccurate information, you can dispute it with the credit bureaus to have it corrected or removed from your credit report.

4. Determine the best type of personal loan for your needs

You’ll typically have the option to choose between an unsecured personal loan and secured personal loan. The latter requires that you put up collateral, such as cash in a savings account or another asset, to get approved, and it’s best suited for people with poor or fair credit.

Also, consider whether you want a fixed or variable interest rate. Variable rates typically start off low but fluctuate over the life of the loan with market rates. Fixed rates, on the other hand, stay the same for the entire repayment term.

5. Gather your documentation

Lenders may require certain documents to prove that your identity and that you’re financially able to repay the debt you’re taking out. That may include:

  • A copy of a government-issued photo ID
  • Income documents, such as pay stubs, W-2 form, bank statements and tax returns
  • Proof of residence, such as a utility bill or lease agreement
  • Checking account information

Having this information in hand when you apply can speed up the application and approval process.


6. Shop around

Before you pick a lender, shop around and compare rates and terms from several lenders to find the right fit. “I think it’s important for a consumer to do some research on the financial institution itself,” said Victoria. “The goal really to find a trusted resource.”

Many lenders allow you to get preapproved without affecting your credit, which can help you compare rates and other features from several lenders. Use a loan payment calculator to get an idea of what it’s going to cost you.

The best personal loans offer low interest rates, flexible repayment terms and fast funding times.

7. Apply

Once you’ve chosen a loan offer, the easiest way to apply is through the lender’s website, but you can also opt to call or visit one of the lender’s physical branches. After you complete the application, you’ll get a final rate offer based on a full credit check. If you want to proceed, accept the loan terms and you’ll receive the money based on the lender’s funding timeline.

What to do if you’re denied a personal loan

If you apply for a loan but don’t get approved, the lender will send a letter with the reasons for the denial. Wait for this letter to find out where to put your focus. Once you know, take steps to improve the situation before you apply again.

Alternatively, consider applying with lenders that specifically work with people who have less-than-perfect credit. These lenders typically charge higher interest rates, but it can be worth it if you really need the cash.

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