Personal Loans

7 Steps to Getting Approved for a Bank Loan

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Getting approved for a personal loan can take time, but once you are approved, you may be able to afford home renovations, consolidate high-interest credit card debt, or tackle unforeseen medical bills.

Applying for a loan may sound daunting, but there are steps you can take prior to applying to improve your chances of approval. If you’re considering applying for a loan, consider the following steps to guide you through the process.

  1. Check and bolster your credit score
  2. Choose the type of loan you need
  3. Comparison shop lenders
  4. Contact your prospective lender
  5. Be prepared to provide documentation
  6. Consider adding a cosigner
  7. Be patient

1. Check and bolster your credit score

Your credit score will be one of the main factors taken into consideration when applying for a loan. This is a number that is determined by a variety of factors, including:

  • The amount of debt you have
  • The age of your financial accounts
  • The types of financial accounts you have
  • Your payment history
  • New applications for credit

Three credit reporting agencies, Experian, Equifax and Transunion, are responsible for compiling your credit history report information.

Rod Griffin, Experian’s director of public education, said that you should get your credit score before applying for a loan.

“We always encourage people to get their credit report at least three months, if not six months, prior to applying and get a credit score when you get that report,” Griffin said. Obtaining a copy of your credit report will give you the same information that lenders use, he added.

Each year, you can request a free credit report from each major bureau by visiting

According to Michele Henney — program manager of the Cameron Center for Finance and Securities Analysis and the Bashaw senior instructor II of accounting at the University of Oregon — a credit score is important for “not only getting approved, but it can also affect the rate of interest that you are charged. So the better the credit risk the lower the interest rate.”

After receiving your credit score and before applying for a loan, take a few simple steps that can help you manage and bolster your credit score:

  • Make sure your bills are paid on time. Paying a bill after its due date, even by a few days, can negatively impact your credit score.
  • Reduce your debt-to-income ratio. This number is calculated by your amount of debt divided by your monthly income. If you are carrying a balance on your credit cards every month, stop using them.
  • Close unused accounts. Henney said that if you have several credit cards open with no balances, lenders can view that negatively. From a lender’s point of view, Henney said, “If I lent money to you, I couldn’t control that you didn’t use that additional credit and suddenly be more in debt than you were before you applied for this loan.”

2. Choose the type of loan you need

Now that you know your credit score, decide whether you’ll need a secured or unsecured loan. Most personal loans are unsecured, including student loans and credit cards. If you fail to pay back an unsecured loan, the lender cannot go after your assets. That makes unsecured loans a bigger risk for lenders.

With a secured loan, such as mortgages and auto loans, your debt is backed by collateral. When you take out a mortgage, your house becomes your collateral. If you fall behind on a secured loan, a lien can be placed on the personal property used to secure the loan.

3. Comparison shop lenders

If you hold all of your accounts at a local bank, start there. According to Henney, the relationship you have with your bank can be important when getting approved for a loan.

Wells Fargo, TD Bank and CitiBank offer personal loans. Many traditional banks allow you to apply online for personal loan offers. You can also visit a local branch to apply.

Typically, credit unions offer lower interest rates and lower fees on personal loans than traditional banks. Hope Credit Union, located throughout several southern states, offers personal loans. PenFed Credit Union offers APRs from 5.99%.

Use our free tool to find loan offers

If you’re not sure where to start your search, you can use our free personal loan tool to help you find loan offers. The tool allows you to select from a number of reasons for the loan — such as purchasing a home, paying for a vacation or a major expense — and then allows you to select the amount you’d like to borrow.

Based on your income, credit score and decision to add a co-signer, this tool will aggregate lending offers and their interest rates. It only takes a few minutes to enter your information and receive potential offers.

4. Contact your prospective lender

Meeting with your lender can be beneficial, according to Henney. “If you’re in a position where there’s some question about whether or not you’re going to qualify, being able to have a face-to-face conversation with somebody,” she said, may help your chance of getting approved.

Henney added that having a relationship with your bank is important. If you have accounts at more than one bank, Henney said it’s possible to apply for a loan where you have established accounts.

5. Be prepared to provide documentation

Now that you know your credit score and have selected the type of loan you’d like to apply for, it’s time to collect important documents. Some lenders will require you to have different documents, but be prepared with such information as:

  • Checking account information
  • Tax returns
  • Titles and deeds

6. Consider adding a cosigner

Our loan tool allows borrowers to add a cosigner, which may generate more offers with potentially lower interest rates. A cosigner can be useful if you are struggling with your credit history or managing debt, according to Griffin: “Having a cosigner or a joint account holder on a credit card can help you establish that account.”

But adding a cosigner has its risks for both the borrower and the cosigner. “If you misuse that account, it will affect their credit history as well,” said Griffin. The cosigner also has a responsibility to ensure that the borrower is responsible and will repay the loan.

Deciding to add a cosigner is a big responsibility that should be taken seriously, Griffin added. In rare instances, some lenders may demand the entire repayment of the loan in the event that the cosigner dies. And if the cosigner declares bankruptcy, the loan may default.

7. Be patient

Getting approved for a personal loan is often faster than applying for other types of loans. AGFed Credit Union can take up to 24 hours to approve a personal loan, while Wells Fargo can give approval in only a few minutes.

Don’t be discouraged if you are denied a personal loan. If you’re turned down, start by asking why you were denied. “It’s just good information for the person to have for later on when they try to do this again,” Henney said.

If you were denied, you could start saving more money to show the lender that you are responsible. “Maybe you’re trying to borrow $10,000 from the bank and in the six months of waiting you’re able to save up $2,000,” Henney said. “That shows the bank that you can manage your money and that you might not be a bad credit risk after all.”


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