Personal Loans
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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How to Prequalify for a Personal Loan — And How It Differs From Preapproval

Updated on:
Content was accurate at the time of publication.

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.

1. Fill out a pre-qualification form

The prequalification process often starts with completing a form on a lender’s website. Every lender is different, but in general you will be asked to provide the following information:

  • Loan details: Loan amount, loan term, loan purpose
  • Personal details: Name, Social Security number, date of birth
  • Contact information: Phone number, email address, mailing address
  • Employment information: Income, place of employment, contact details for your employer
  • Other financial information: Estimation of assets, investments, retirement accounts

2. Undergo a soft credit check

Once you submit your information, the lender will perform a soft inquiry on your credit. Notably, a soft inquiry will allow the lender to review your credit report, but it will not impact your credit score. This information allows the lender to make a determination on whether or not you prequalify for the loan.

3. Find out if you prequalify

In many cases, you’ll find out if you prequalify for a loan in just a few minutes after you complete your application. Prequalification will typically allow you to see your potential loan terms, such as:

  • Approved loan amount
  • Estimated annual percentage rate (APR)
  • Any added fees
  • Estimated monthly payments

If you like this tentative offer and decide to officially apply for the personal loan, remember that the lender is still allowed to change the terms until you officially sign a loan agreement. You can reduce your chances of seeing a change by providing accurate information on your prequalification form.

4. Review your personal loan offers

When prequalifying for a loan, it’s a good idea to shop around. Comparing personal loan offers from at least three lenders can help ensure that you secure the best interest rate available to you, as well as loan terms that suit your needs.

Be sure to give each lender the same information as you fill out your prequalification forms. This will help guarantee that you’re making an apples-to-apples comparison when you’re ready to see how your offers stack up against one another.

Here are a few factors to consider:

  • APR: The APR on a loan is a measure of the interest rate offered by the lender plus any fees, such as an origination fee. This number makes it easier to compare offers between multiple lenders.
  • Loan term: Longer personal loan terms generally come with lower monthly payments, which can make borrowing more affordable. However, you’ll pay more in interest over time. By the same token, shorter personal loan terms are usually more cost-effective overall, but tend to come with higher monthly payments.
  • Monthly payment amount: Use a personal loan calculator to make sure an estimated monthly payment amount fits comfortably within your budget. Loan payments typically get reported to the three credit bureaus, so a history of late or missed payments could damage your score and stay on your credit report for some time.
  • Lender perks: All else being equal, sometimes available lender perks like the ability to choose your own payment date, available discounts or 24/7 customer assistance, can help you choose the best loan option for you.

5. Formally apply for a loan

The last step in this process is to officially apply for a personal loan.

Typically, this stage of the process involves filling out another application form and uploading some supplemental documentation onto the lender’s website. Again, each lender will set its own personal loan requirements. But, as a rule of thumb, you’ll need to provide income verification in the form of paystubs, W2s or tax returns. You’ll also likely need to submit to a hard credit pull, which can temporarily ding your score.

If you’re approved, you’ll be presented with an official loan offer. Once a contract has been signed, it’s simply a matter of transferring funds into your bank account. Some lenders offer quick loans with same-day funding, while others may need a few days to complete this step.

Prequalifying for a personal loan doesn’t affect your credit score, so it lets you compare lenders and APRs at no risk — saving you money over the life of the loan.

The table below compares two $20,000 loans, one with a 10.50% APR and the other with a 15.50%. Check it out to see how much the lower APR can save you.

Cost savings between two personal loans with different APRs
Loan amount$20,000$20,000
Loan length5 years5 years
Estimated APR*10.50%15.50%
Monthly payment$429.88$481.06
Interest paid$5,792.68$8,863.83
Total loan cost$25,792.68$28,863.83

*APRs used are for demonstrative purposes only

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Although the two terms may sound the same, “personal loan prequalification” and “personal loan preapproval” mean two different things.

Put simply, a prequalification gives you an estimate of how much the lender could be willing to lend you based on your self-reported financial information. A preapproval, on the other hand, involves the lender taking the time to vet your financial information to provide a much more accurate and specific estimate of how much they might lend you and under what terms.

Neither option is an absolute guarantee of loan approval, but a preapproval provides more reassurance because the lender took the time to perform a review of your finances before making their decision.

If you go through the prequalification process and are denied a personal loan, you might not be sure what to do next. Here are some steps that could help:

  • Ask the lender what happened. Reach out to the lender directly for an explanation of why you were turned down. It might still be possible to get approved or, if not, you can use this insight to improve your chances for the next time.
  • Check your credit score and report. You can check your credit score for free through LendingTree Spring or order your free credit report at for a closer look at your accounts, as well as to find out if there are any errors.
  • Explore other options. There are many personal loan alternatives that could work for you, depending on your situation.
  • Try applying with a cosigner. If allowed, adding a cosigner to your application could boost your chances of qualifying for a loan, as well as potentially help you get better rates and terms.

1. Check your credit score and work to improve it if necessary

Personal loans are typically unsecured loans, meaning they don’t require collateral. This means that personal loan lenders rely heavily on your financial history to determine your eligibility as a borrower. Your credit score is a reliable indicator for lenders, since it factors in your payment history, credit utilization ratio, credit inquiries and other financial information.

It can be hard to qualify for a personal loan if you have a bad credit score. To increase your chances of prequalifying for a personal loan, consider working to improve your credit score before you apply.

2. Calculate your debt-to-income ratio

Another factor that personal loan lenders consider when issuing loans is an applicant’s debt-to-income (DTI) ratio. That’s because your DTI ratio gauges your ability to afford new debt. A good debt-to-income ratio is typically 35% or less.

Here’s how to calculate your DTI ratio:

Total monthly debt payments / Gross monthly income = DTI ratio

If your debt-to-income ratio is on the high end, consider paying down some of your debt before applying for a personal loan or seeking an opportunity to increase your income.

3. Research lenders for your credit band

Not every lender will be a good fit for you, so search for lenders that work with borrowers who have similar credit profiles to your own. Some lenders offer bad credit loans, but keep in mind that your loan terms may not be so favorable. Other lenders specialize in excellent credit loans.

By shopping around for a loan offer with the lowest possible APR for each unique financial situation, you may be able to save money on interest over the life of a loan.

It is definitely possible to prequalify for a personal loan. The process typically involves filling out a form with your personal and financial information, as well as submitting to 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. But generally, a score of 580 is helpful for getting a loan, and the best rates are reserved for borrowers with even higher scores.

Although they may sound similar, loan prequalification and loan preapproval are two separate processes. While loan prequalification involves undergoing a soft credit inquiry and won’t harm your credit score, loan preapproval may involve a hard credit inquiry, which can temporarily lower your score.