Personal Loan Requirements and How to Meet Them
- Every lender has different personal loan requirements, but lenders typically consider your credit score and history, income, debt-to-income ratio, age and employment.
- Lenders may also evaluate your collateral (if you have any), citizenship, residency and whether you have a bank account and physical address.
- You may need to provide documents to prove your identity, income, employment and address.
While personal loan requirements vary by lender and loan amount, you typically need a good credit score and reliable income to qualify. Here’s a behind-the-scenes look at what you’ll need to get a personal loan and how lenders evaluate personal loan applications.
Common personal loan requirements
It’s hard to know if you’ll qualify for a loan if you don’t even know what lenders are looking for in applicants. Here are some of the most common things lenders look for when evaluating you for a personal loan:
- Credit score: There’s no universal credit score required for a personal loan, but you’ll have a harder time qualifying with bad credit (a FICO Score below 580)
- Credit history: Ideally, you have no bankruptcies, delinquencies or recent late payments on your record
- Income: You’ll typically have better odds with a higher income
- Debt-to-income ratio: Lenders typically look for a DTI ratio below 35% to as high as 50%
- Employment: Lenders tend to prefer full-time employees, but part-time, self-employed, retired or unemployed borrowers often still qualify
- Age: 18+ (or at least the age of majority, which is 19 in some states)
- Documents: You may need to upload documents to prove your identity, income, employment and address
Some lenders also consider other information when evaluating your personal loan application, like:
- Collateral: When you back your loan with collateral, it must meet the lender’s requirements (e.g., worth a certain amount)
- Citizenship: Some lenders require U.S. citizenship, permanent resident status, a Social Security number or U.S. visa; others offer loans for non-citizens
- Residency: Some lenders require you to live in the U.S. with a physical address (not a P.O. Box), and many lenders only operate and offer loans in certain states
- Administrative: You may need to provide evidence of a bank account or email address
- Membership: Credit unions require membership to take out a loan, and banks may offer larger amounts, discounts or loans exclusively for current customers
You typically need to be a member to get a loan from a credit union, and each credit union has its own requirements for membership. Many allow you to join based on where you live, where you work or your military status. Others offer loopholes to join, like making a donation to a nonprofit or joining a community association.
Documents needed for a personal loan
Lenders often ask for proof of your identity, employment and residency. Gather these documents and pieces of information before you apply for a loan to make the process easier and faster.
Note that you typically only need one document for each category (e.g., driver’s license for proof of identity, W-2 for proof of income, etc.).
| Document/information | Where to look | |
|---|---|---|
| Proof of identity | Government ID (e.g., driver’s license, passport, permanent residency card, visa), Social Security number | Wallet, safe or anywhere you keep important documents |
| Proof of address or residency | Utility bill, lease, mortgage statement | Email, online portal for utilities (e.g., electric, waste management, internet), physical utility bills or anywhere you keep important documents |
| Proof of income or employment | W-2, 1099, job offer letter, paystubs, tax returns, timesheet bank statement | Online work portal, email or bank account; you can also ask your employer to send you physical copies of paystubs or W-2s |
How to find out if you’ll qualify
When lenders look at your personal loan application, they’re evaluating whether you’re likely to pay the money back and whether you can afford the loan.
A solid credit score and history of on-time payments show lenders you’ve handled credit responsibly in the past, and a low debt-to-income ratio, steady employment and regular income show you can afford a loan.
The best way to see if you’re likely to qualify for a loan is to prequalify. You’ll enter basic information about yourself, and if you qualify, the lender will send you your approximate loan rates.
Doing this won’t impact your credit, so you can prequalify with several lenders to shop around and compare rates. Later, if you want to proceed with a loan, you’ll submit a formal application.
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What to do if you’re denied for a personal loan
- Prequalify with other lenders. Every lender evaluates your application separately using their own criteria. One denial doesn’t mean it’s the end of the road. Prequalify with a few lenders or use a loan marketplace like LendingTree to potentially get several offers at once.
- Apply for less money. Since lenders take on less risk with smaller loans, you’re more likely to qualify when you apply for less money. Reevaluate how much you actually need to borrow and apply for a smaller loan if at all possible.
- Add a co-borrower with good credit. Co-borrowers act as a guarantee for your loan, since they’re equally responsible for payments. Ask friends and family if they’d be willing to apply for a joint loan with you. Just make sure you both understand the risks — their credit will suffer if you miss payments, and they’re on the hook for the entire loan if you don’t pay.
- Add collateral. Applying for a secured loan with collateral can improve your odds of qualifying for a loan since the lender can take your property if you stop making payments. Common types of personal loan collateral are personal savings accounts and CDs.
- Improve your credit. Your credit score is the single most important factor in determining your personal loan eligibility, so taking the time to improve your credit score can make a big difference in whether you qualify and what kind of rates you’ll be offered.
Learn about more strategies to improve your odds of getting a personal loan and consider personal loan alternatives to help you pay for your current expenses.
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