How to get a personal loan: the basic path
Getting a personal loan means finding a lender, submitting financial information, waiting for a decision, and then receiving money you repay in fixed monthly installments. The process typically takes three to seven business days from process to funding, though some lenders fund within 24 hours. You will need proof of income, a valid ID, and a bank account where the lender can deposit the money.
The lender will check your credit score and history to decide whether to lend to you and what interest rate to charge. A higher credit score usually means a lower interest rate. If your credit score is low, you may still find lenders willing to work with you, but the interest rate will be higher, making the loan more expensive overall.
Personal loans come from banks, credit unions, and online lenders. Each type has different approval speeds and requirements. Banks typically take longer but may offer lower rates if you have good credit. Credit unions often have lower rates for members. Online lenders usually approve and fund fastest, sometimes within one business day.
Key Takeaways
- You will need a government-issued ID, proof of recent income, and an active bank account to start the process with any lender.
- Lenders check your credit score and history to decide whether to lend and what interest rate to offer you.
- Banks, credit unions, and online lenders have different approval timelines and interest rates, so comparing offers from multiple lenders saves money.
- The interest rate and loan term determine your monthly payment, so a lower rate or longer term means lower monthly costs but more total interest paid over time.
- Once approved and funded, you repay the loan in equal monthly installments, and missing payments damages your credit and may trigger late fees.
What documents and information you need before you start
Gather these items before you contact any lender. Having them ready speeds up the process and shows the lender you are organized.
Government-issued ID: A driver's license, passport, or state ID. The lender needs to verify you are who you say you are.
Proof of income: Recent pay stubs (usually the last two months), a tax return from the last year, or a bank statement showing regular deposits. Self-employed people may need to provide two years of tax returns. Some lenders also accept offer letters from a new employer if you have not started work yet.
Bank account information: The routing number and account number where you want the lender to deposit the loan money. This is on the bottom left of your checks or available through your bank's website or app.
Employment information: Your current job title, employer name, and how long you have worked there. Lenders want to know your income is stable. Most require at least three to six months at your current job, though some will lend to people who just started.
Social Security number: Lenders need this to pull your credit report and verify your identity with the Social Security Administration.
Comparing lenders and loan offers
Do not accept the first offer you receive. Comparing at least three lenders takes one to two hours and can save you hundreds or thousands of dollars over the life of the loan.
When you compare, look at the annual percentage rate (APR), not just the interest rate. The APR includes the interest rate plus fees, so it shows the true cost of borrowing. A loan with a lower APR is cheaper even if the interest rate looks similar.
Also compare the loan term — the number of months you have to repay. A longer term means a lower monthly payment but more total interest paid. A shorter term means a higher monthly payment but less total interest. Calculate what monthly payment fits your budget, then see which lender offers that at the lowest APR.
Check whether the lender charges origination fees (a one-time fee taken from your loan amount), prepayment penalties (a fee if you pay off the loan early), or late fees (a fee if you miss a payment). Some lenders charge none of these. Lenders that charge no origination fee are often cheaper overall, even if the APR is slightly higher.
Use online comparison tools or contact lenders directly. When you contact a lender, ask for a Loan Estimate or Disclosure Statement — a document that shows the APR, monthly payment, total amount you will repay, and all fees. This document is free and does not hurt your credit score.
The process and approval process
Once you choose a lender, you will fill out an process. Most online lenders let you start on their website; banks and credit unions may require you to visit in person or call.
The process asks for your personal information (name, address, date of birth, Social Security number), employment and income details, and the loan amount you want. Be honest and accurate. Lenders verify this information, and false answers can result in the lender canceling your loan.
After you submit, the lender performs a hard credit pull — they request your full credit report from one or more of the three major credit bureaus (Equifax, Experian, TransUnion). This temporarily lowers your credit score by a few points, but the impact fades within a few months. Multiple hard pulls within 14 days usually count as one pull, so comparing lenders within two weeks does not multiply the damage.
The lender reviews your credit report, income, and debt-to-income ratio (how much you owe each month compared to how much you earn). If everything checks out, you receive a loan offer with the APR, monthly payment, and loan term. You can accept or decline without penalty.
If the lender needs more information — such as a recent bank statement or a letter from your employer — they will ask. Providing this quickly speeds up approval. Once you accept the offer, funding usually happens within one to three business days, though some lenders fund the next business day.
Understanding your monthly payment and repayment schedule
Once the lender deposits the loan money into your bank account, your repayment period begins. You will make equal monthly payments for the length of the loan term.
Each payment covers part of the principal (the amount you borrowed) and part of the interest (the cost of borrowing). Early in the loan, most of your payment goes toward interest. As you pay down the principal, more of each payment goes toward principal.
The lender will send you a amortization schedule — a table showing each monthly payment, how much goes to principal and interest, and your remaining balance. Review this so you know exactly what you owe each month.
Set up automatic payments from your bank account if the lender offers it. Automatic payments may support you never miss a due date, which protects your credit score and avoids late fees. Some lenders offer a small interest rate discount (usually 0.25 percent) for setting up automatic payments.
What happens if you miss a payment or want to pay early
Missing a payment damages your credit score when ready. Most lenders charge a late fee (typically $15 to $35) if your payment is more than 15 days late. If you miss a payment by 30 days or more, the lender reports it to the credit bureaus, and it stays on your credit report for seven years.
If you are struggling to make a payment, contact your lender before the due date. Some lenders offer forbearance or deferment — temporary pauses on payments — though you may still owe interest during this time. Asking early gives you more options than waiting until after you miss a payment.
Paying off the loan early saves you interest. If your loan has no prepayment penalty, you can pay extra toward principal each month or pay off the entire balance whenever you want. Check your loan documents to confirm there is no prepayment penalty before you do this.
Where to find lenders and how to avoid scams
Personal loans come from several types of lenders. Banks (Wells Fargo, Chase, Bank of America) typically require good credit and offer competitive rates. Credit unions (such as those you join through your employer or community) often have lower rates and more flexible approval standards for members. Online lenders (LendingClub, Upstart, Prosper) approve quickly and work with people who have fair or poor credit, though rates are higher.
Avoid lenders that may provide approval, ask for payment upfront, or pressure you to decide when ready. Legitimate lenders never charge a fee before you receive the loan. If a lender asks for money to "process" your process or "find" your loan, it is a scam.
Check the lender's registration with your state's financial regulator. Most states require lenders to be licensed. You can verify this on your state's Department of Financial Services website. Also read recent customer reviews on independent sites like Trustpilot or the Better Business Bureau, but remember that unhappy customers are more likely to leave reviews than satisfied ones.
Frequently Asked Questions
What credit score do I need to get a personal loan?
Most banks require a credit score of 620 or higher. Credit unions often work with scores as low as 580. Online lenders vary widely — some work with scores below 580, though the interest rate will be much higher. Check with multiple lenders because approval depends on more than just your score; your income and debt also matter.
Can I get a personal loan if I have bad credit?
Yes, but the interest rate will be higher. Online lenders and credit unions are more likely to approve people with poor credit than traditional banks. You may also need a co-signer — someone with better credit who agrees to repay the loan if you do not. A co-signer's credit is also checked and affected by the loan.
How long does it take to get the money after I am approved?
Most lenders fund within one to three business days of approval. Some online lenders fund within 24 hours. Banks may take five to seven business days. Ask the lender for their typical timeline before you explore. Weekends and holidays can delay funding, so explore on a weekday if you need the money quickly.
What is the difference between a personal loan and a credit card?
A personal loan gives you a fixed amount upfront that you repay in equal monthly payments over a set period. A credit card gives you a credit limit you can borrow against repeatedly, and you can pay any amount between the minimum and the full balance. Personal loans usually have lower interest rates but less flexibility. Credit cards are better for ongoing expenses; personal loans are better for a one-time expense.
Can I use a personal loan for anything I want?
Most personal loans have no restrictions on how you use the money. You can use it for debt consolidation, home repairs, medical bills, a vacation, or anything else. Some lenders ask what you plan to use the money for, but they rarely refuse based on your answer. A few lenders restrict use for illegal activities or certain investments, but these are rare.