How to get a personal loan

By Nooreen B
Modified on June 6, 2023
how to get a personal loan

A personal loan can be a great way to pay for a large or small purchase. If you are thinking of taking out one of these loans but haven’t done so before, you may not be sure how to get a personal loan. The good news is that the process is pretty simple, and once you know about getting started, you can figure out whether it is the right choice for you. Continue reading to learn more about how personal loans work. 

Steps To Get a Personal Loan

Knowing the process for a personal loan will be extremely helpful before you jump into things for yourself. Here is the process of getting unsecured loans (the typical type) in most scenarios:

Applying for Pre-approval To Find the Right Lender 

The first step to getting a personal loan is to find a lender you want to work with. You can find personal loans with a financial institution like a bank or credit union. Credit unions and banks usually have strict credit requirements. The good news is that you can also look at online lenders or in-person private lenders. For pre-approval on a personal loan application, lenders will ask for basic information about you, your income, and your credit score. 

Compare Personal Loan Rates, Repayment Terms, and the Lenders

The next step with the personal loan is to compare your options. Once you apply for pre-approval, you can find out about interest rates, loan terms, loan amount, repayment terms, and more. To find the best loan, ensure that the loan’s interest is competitive, the loan, in general, is affordable, and works for your monthly budget. Personal loan rates will vary on your credit scores, the lender, and market trends. Once you find the lender you want to work with, you can take steps to get final approval. 

Move Forward With Final Loan Approval

For final approval, you must verify all your information from the pre-approval process. Lenders will ask for proof of income, which can be proved through bank statements, pay stubs, etc. They will also ask for evidence of residency—pieces of mail, bank statements, utility bills, etc. And finally, they will ask to conduct a hard credit check from three major credit reporting agencies. If your personal loan is secured, they will also ask for documentation regarding an asset.  

Figure Out if the Loan Is Right for You

If you are approved for the loan, it will be important to really look at things like the monthly payment and repayment terms. If you are unsure what your monthly payments will look like, you can use a personal loan calculator; all you have to do is plug in the correct numbers. Ask your lender about any questions or concerns you may have about the loan. For example, many people ask about origination fees and prepayment penalties. If you still think moving is a good idea, you can do so! 

Sign the Loan Agreement and Get Funding

Finally, all you have to do is sign the loan contract. From here, you will get the funds! Usually, these funds will be sent straight to your bank account. Or you can get the funds mailed to you or pick them up in person. 

Begin Repaying the Personal Loan

Once you have your funds, you can use them as you like. The convenient thing about personal loans is that you can use the funds on one significant expense or multiple more minor expenses, and you don’t need to use them immediately. In general, lenders will ask for repayment 30 days from funding, so keep that in mind. Once repayment starts, you’ll have to make monthly payments until the loan is repaid in full. 

What Do I Need for a Personal Loan?

To get loan approval with a personal loan, you will need to prove your identity and income and be okay with a credit check. While most personal loans are unsecured loans, if you are working with a secured option, you will need some documentation on that asset—your lender will let you know about what you’ll need for that. Here are the things you will need to apply for a standard personal loan option: 

  • A form of a government-issued photo ID (a driver’s license, passport, permanent resident card, military ID, etc.) 
  • Proof of income and employment information (tax returns, bank statements, pay stubs, letters of income, etc.)
  • Proof of residency (a voter registration card, letters of mail, mortgage statement, lease, utility bills, etc.) 

You will also have to okay a hard credit inquiry on your credit report as a part of the loan application process. 

Lenders will use all this information on your loan application to better guess whether you can make your loan payments. 

Can Bad Credit Borrowers Get Personal Loans?

Having good credit will be helpful with any loan option, but bad credit is also okay. There are many lenders out there that are pretty flexible when it comes to credit scores and credit history. If you have bad credit, online lenders are probably the best bet to start. 

If you have bad credit, lenders will focus more on your income and debt-to-income ratio, so make sure that you show all your income in the loan application and try to avoid unnecessary debt/loan options if possible.  

What Are Personal Loans Used For? 

One of the advantages of a personal loan is that you can use the loan funds for all kinds of different expenses. Here are some of the most common reasons that people pursue personal loan offers

Debt Consolidation / Debt Refinancing

One primary reason people take out personal loans is to pay off existing debt. In most cases, this debt includes loans with high interest, like payday loans or multiple credit card balances. You can borrow money with a lower interest rate through a personal loan, making repayment more manageable and faster. 

A Down Payment on a Large Purchase

Another common reason people take out a personal loan is a down payment on a large purchase such as a home or a car. With these large purchases, you will need to have at least 10% or so down, which can be thousands of dollars.

To Pay Medical Bills

Medical bills can show up unexpectedly for anyone, and depending on the type of bill, you could owe hundreds or even thousands of dollars. With personal loans, you could pay off your medical bills and have a more manageable payment schedule.  

Home Improvement and Repairs

Homeowners can have several necessary repairs or some improvements they may want to make. A personal loan can be an excellent way to finance home improvements and repairs, especially if you don’t have enough value to borrow a home equity loan. 

Wedding Expenses

Weddings can cost thousands of dollars, and a personal loan can help take care of some of those costs. Whether you need to pay for a venue, catering, wedding clothes, etc. 


Whether you need to travel for work, an emergency, or fun, a personal loan can help you pay for flights, car rentals, stays, and other miscellaneous expenses. 

How to Make Repayment Easy With a Personal Loan

Missed payments on your loan will hurt all three of your credit scores and can lead to loan default (which will hurt your credit score even further). The best way to ensure you pay your loan on time is to set up automatic payments through a checking account. Or you can also do simple things like set up reminders on your phone or computer. 

If you do have to make a late payment, you should know that most lenders charge a late fee, which can add to your loan cost. 

If your financial situation changes throughout loan repayment, the first thing you should do is to let your lender know. In most cases, lenders will be willing to work with you to come up with a financing option to get payments back on track. If you do need a new lender, refinancing your personal loan is definitely an option. 

Key Takeaways: How to Get a Personal Loan 

Getting a personal loan is relatively simple! The first step is to do your research and find a handful of lenders you may want to consider. From here, you can apply for pre-approval. Once pre-approved, it will be easy to compare loan terms because you can look at exact interest rates and other repayment terms. Once you have a loan option you want to go with, talk to the lender and look at the details even further to see if the personal loan is right for you. Once you know it is, all that is left to do is sign the loan contract and get your funds! The money from one of these loans can be used right away for all kinds of expenses. Once repayment begins, there are easy ways to ensure that you pay your loan back on time. 

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