How to Prequalify for a Personal Loan and How It Differs From Preapproval
There are many reasons why you may want to prequalify for a personal loan, such as checking your chances of loan approval and estimating your loan terms without harming your credit score. If you’re considering personal loan prequalification, here’s what you need to know.
- Prequalification is a loan shopping tool that lets you check estimated rates and eligibility with a soft credit check.
- Preapproval is a deeper review and may require a hard credit inquiry, depending on the lender.
- Prequalification offers aren’t final. Your rate, loan amount or fees can change after the lender verifies your information and you submit a full application.
Prequalification vs. preapproval vs. application
Lenders often use the words “prequalification” and “preapproval” interchangeably. Both terms describe how far along you are in the personal loan process, but they technically don’t mean the same thing.
Prequalification doesn’t hurt your credit score and lets you check rates when you’re shopping. Preapproval typically comes after you choose an offer from a lender and is the step between checking rates and completing the loan process.
| Prequalification | Preapproval | Full application | |
|---|---|---|---|
| What it is | Early estimate based on initial info | More detailed review for a more accurate estimate | Formal request for credit |
| Info used | Often self-reported basics | Self-reported basics, possibly some documentation | All application info is confirmed via documentation and/or electronic verification |
| Credit check | Typically requires soft inquiry | May require a hard inquiry (confirm with lender) | Generally requires hard inquiry |
| Impact on credit score | None | May impact credit score (confirm with lender) | Likely to impact credit score |
| How firm are terms? | Not final, can change | More reliable than prequal but not guaranteed | Terms are final once loan is approved |
| What happens next | Compare offers, choose one and apply | Move to application or final verification | If accepted, sign loan agreement and get funds |
5 steps to prequalify for a personal loan with LendingTree
Prequalification can look different depending on where you shop. With LendingTree, you fill out one request and may receive multiple matched offers, so you can compare rates and terms in one place.
1. Fill out a prequalification request
The process starts by completing a single form on LendingTree. You’ll be asked to provide:
- Loan details: Loan amount, loan purpose, how fast you need funding
- Personal details: Name, date of birth, email
- Contact information: Phone number, mailing address, email address
- Income information: Employment status, annual income before taxes
- Other financial information: Homeowner status, direct deposit status, estimated credit score
2. Undergo a soft credit check
After you submit your information, LendingTree will ask permission to run a soft credit inquiry to help generate more accurate, personalized offers. A soft inquiry allows lenders to review your credit report, but it won’t impact your credit score.
3. Find out if you prequalify (and see offers)
LendingTree users get 11 offers on average.
If you pass prequalification, your offers will show you important information like your potential loan amount and term, estimated annual percentage rate (APR), as well as estimated fees and monthly payments.
Keep in mind that prequalification offers are not final. If you decide to officially apply with a lender, the lender can still change the terms until you receive and sign a loan agreement.
You can reduce the chances of changes by providing accurate information on your prequalification form and responding quickly if the lender requests verification.
4. Compare your personal loan offers
Just like car insurance companies, lenders each have their own way of calculating rates. You should expect to get different rates and terms from different companies.
LendingTree provides a platform for you to request and compare offers from multiple lenders. According to an internal study, LendingTree users can save an average of $1,659 by comparing personal loans.
For an apples-to-apples comparison, focus on the offers that have matching loan details, like the loan amount and loan term.
APR: The APR on a loan shows the annual cost of borrowing, including interest and fees. The lower the APR, the cheaper the loan.
Fees: Personal loans can come with origination fees. Origination fees are intended to cover loan processing and are usually folded into your loan, where it will accrue interest. Having better credit can make origination fees less likely.
Loan term: Your loan term is the length of time you have to pay back what you borrowed. Longer loan terms typically mean lower monthly payments but more total interest. Try to choose a shorter term to save more money.
Monthly payment amount: Use a personal loan calculator to make sure another monthly payment fits comfortably within your budget.
Collateral: A secured personal loan is one that requires collateral, usually your car, home fixtures or savings account. If you fall too far behind on payments, the lender can repossess your collateral. Secured loans are usually easier to qualify for and/or have lower rates.
5. Formally apply with the lender you choose
Once you pick an offer, you’ll complete a full application directly with that lender. This step often involves providing documentation and may include a hard credit inquiry, which can temporarily impact your score.
If you’re approved, you’ll receive an official loan offer. After you sign the contract (often electronically), the lender will process the application and send the funds. You could see money in your bank account within 24 hours, but timing depends on the lender.
Want more details on how online loan marketplaces work?
This guide explains how to compare personal loan offers on LendingTree and what can affect rates and approval.
Average LendingTree personal loan rates
Personal loan rates depend on multiple factors, but credit score is a major one. To help you get an idea of what you might qualify for, find your credit band in the table below. This data shows the average rates that users typically see on the LendingTree marketplace, organized by credit score.
| Credit tier | Average APR |
|---|---|
| Excellent (800 and above) | 15.75% |
| Very good (740-799) | 17.89% |
| Good (670-739) | 23.27% |
| Fair (580-669) | 27.79% |
| Poor (under 580) | 30.25% |
For more info, check out our Average LendingTree Personal Loan Rates and Marketplace Data to explore more real borrower data, including the average credit score for LendingTree users who received at least one offer.
If you can’t get prequalified (next steps and how to improve your chances)
If you’re denied a personal loan during prequalification, you might not be sure what to do next. Here are a few practical next steps.
What to do right now
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Ask what drove the decision: If you’re working with a direct lender, ask why you were declined or offered unfavorable terms.
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Check your credit reports for errors: Review your credit report at AnnualCreditReport.com and dispute any mistakes.
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Consider alternatives: Consider a personal loan alternative, like a balance transfer credit card or home equity loan. Depending on your circumstances, a personal loan might not be the right fit.
- Use a cosigner (if allowed): Adding a cosigner to your loan may improve approval odds or pricing.
What to do before you apply again
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Raise your credit score: Taking steps to improve your credit score now can make it easier to prequalify for a loan later.
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Lower your debt-to-income ratio: Your total monthly debt payments divided by your gross monthly income is your debt-to-income ratio (DTI). Paying down debt or increasing income can help.
- Shop lenders that fit your profile: Some lenders focus on fair credit, others on excellent credit. Matching your “credit band” can improve your odds. Using a marketplace can help you compare offers from multiple lenders at once.
Frequently asked questions
It is definitely possible to prequalify for a personal loan. It usually takes a few minutes, a quick form and a soft credit check.
Every lender sets its own eligibility requirements, so it’s hard to give one answer for the credit score needed to get a personal loan. Some lenders don’t have a minimum credit score requirement. Others only work with good or excellent scores. But generally, you may have a hard time qualifying if your score is below 580.
Loan preapproval can drop your score temporarily as it typically requires a hard credit inquiry. According to FICO, most people can expect their score to drop by less than five points after a hard credit inquiry.
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