When you apply for a personal loan, the lender will approve or deny your application based on whether you meet its eligibility criteria. Personal loan requirements are similar across lenders, though some may have higher approval standards.
Here are some common personal loan requirements and tips on how to improve your chances of getting approved.
How lenders evaluate your personal loan application
Credit score
Your credit score is a key factor lenders consider when evaluating you for a personal loan. A credit score helps lenders understand your reliability as a borrower.
Many lenders require minimum credit scores in the 600s. Some desire loan applicants with good or excellent credit (scores of 690 and higher), while others accept borrowers with fair or bad credit (scores up to 689).
If you have good or excellent credit, lenders will typically offer you better annual percentage rates and terms than if your credit is fair or bad.
Here are the average rates by credit band that borrowers who pre-qualified with NerdWallet received over the last 90 days:
Borrower credit rating | Score range | Estimated APR |
|---|---|---|
Excellent | 720-850 | 15.06% |
Good | 690-719 | 19.65% |
Fair | 630-689 | 23.87% |
Bad | 300-629 | 27.42% |
» GET STARTED: Check your credit score for free
Credit history
Lenders also consider your credit history. A solid history of on-time debt payments, plus success managing a mix of different credit types, will make you a favorable candidate for a loan.
Many lenders require you to have at least a couple years of credit history.
You can view your credit reports, which show payment history, for free with NerdWallet or at AnnualCreditReport.com.
Income
Lenders want to see that you have steady income or cash flow that can support monthly loan payments. Some lenders have specific minimum monthly or annual income requirements.
A paycheck isn’t the only acceptable income source. Many lenders consider income from sources like alimony or Social Security payments, so it’s important to list all your regular income sources on a loan application.
Debt-to-income ratio
Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward debt payments. Lenders use DTI to evaluate your ability to afford new loan payments. The lower your DTI, the better; however, some lenders may approve loan applicants with higher DTIs.
Lender requirements
Here’s a sample of what some lenders told us they require to qualify for a personal loan.
Lender | Minimum credit score | Minimum credit history | Minimum income | Maximum allowable DTI |
|---|---|---|---|---|
600 | 3 years | Varies based on your state | 70% (including mortgage) | |
640 | N/A | $85,000 a year | 65% | |
660 | N/A | $25,000 a year | N/A | |
680 | 2 years | N/A | 80% (excluding housing) | |
600 | 3 years | N/A | 40% | |
630 | 2 years | N/A | 55% (including housing) | |
640 | 2 years | $24,000 a year | 40% (excluding mortgage) or 70% (including mortgage) | |
600 | 3 years | N/A | 75% (including housing) | |
680 | N/A | $12,000 a year | 60% |
Other criteria for personal loan eligibility
To get a personal loan, lenders may also ask that you:
Are at least 18 years old.
Have a verifiable phone number or email address.
Have a valid Social Security number or Individual Taxpayer Identification number.
Live in a state where the lender operates.
Have U.S. citizenship or permanent residency.
If you’re getting a personal loan from a credit union, you’re required to be a member. Some banks also require you to be an existing customer before getting a loan.
Documents required for a personal loan
When you apply for a personal loan, you may be asked to submit documents to verify information like your income and identity. To speed up the process, gather necessary documents before you apply.
Required documents can include:
Proof of identity, like a government-issued ID.
Proof of address, like a utility bill or mortgage statement.
Proof of income and employment status, like a pay stub, tax return or W-2.
Proof of additional income such as alimony or child support.
Tips to qualify for a personal loan with bad credit
There are a few things that can strengthen your chances of getting approved for a personal loan, even if you don't have a perfect credit score.
Add a co-signer or co-borrower. Adding a co-signer or co-borrower with strong credit and income can help you qualify for a loan or get a lower interest rate. A co-signer simply vouches for your ability to repay a loan, while a co-borrower has equal access to the funds. Keep in mind that both co-signers and co-borrowers are responsible for loan payments if you stop making them.
Add collateral. A secured personal loan is backed by an asset like a car or savings account. These loans can be easier to qualify for and can have lower rates or higher amounts than unsecured loans. Just know that the lender can take your collateral if you fail to make payments.
Ask for less money. A large loan can feel risky to a lender, so try to keep your loan amount low for a better chance of approval.
Lower your debt-to-income ratio. If you can lower your DTI by paying down existing debt or increasing your income, you may have a better chance of qualifying for a personal loan.
Questions to ask before applying for a personal loan
Here are a few questions to ask yourself when deciding whether to get a personal loan, even if you meet the requirements.
1. Is a personal loan the right financing option for me?
Personal loans can be used for a variety of reasons, for example, to consolidate debt or finance a medical procedure. However, you may have lower-cost options, such as a 0% balance transfer credit card or family loan. Compare other ways to borrow money before choosing a personal loan.
» MORE: Pros and cons of personal loans
2. Have I compared loan offers from multiple lenders?
Many personal loan lenders let you pre-qualify online to check your eligibility and see your estimated rate and terms before formally applying for a loan. Pre-qualifying involves a soft credit check, which doesn’t impact your credit score. This makes it easy to compare loan offers from multiple lenders.
3. Can I afford the monthly payments?
Personal loan payments should fit comfortably in your budget. When you pre-qualify, the lender will likely share your estimated monthly payment amount. You could also use a personal loan calculator to estimate your monthly payment. Once you understand what you can expect to pay on your loan each month, check your budget to see if that’s something you can afford.
4. Do I understand the fees?
Some lenders charge origination fees, which usually range from 1% to 10% of the loan amount. These fees are typically deducted from your loan before you receive the funds, leaving you with less money than you were approved for. Other common charges are late fees and nonsufficient funds fees, if you miss a payment due date or don’t have enough money in your bank account when you submit your payment.
What happens if I’m denied?
If your loan application is denied, the first step you should take is to understand why. Lenders are required under the Equal Credit Opportunity Act to provide the reason for denying a loan application. This information can help you identify what you need to do to improve your chances of future loan approval.
If you were denied due to a low credit score
Take steps to build your credit by paying down debt, resolving errors on your credit report or building more credit history.
Keep in mind that this process could take a few months or more than a year. It can be difficult to qualify for a loan if you reapply too soon and haven’t built up your credit after being denied.
If you need to borrow money right away
Look into financing alternatives if you can’t wait to build your credit or address other issues causing your loan application to be denied.
For financing a large purchase: Many merchants offer buy now, pay later plans that let you break up an expense across four biweekly payments, often without interest. Try to limit yourself to one BNPL plan at a time to avoid overextending your finances.
For quick cash in between paychecks: Various cash advance apps let you borrow a few hundred dollars, usually with no interest, to be repaid from your upcoming paycheck. These apps may come with fees or subscription costs, and they may request an optional tip for the service.
For an informal borrowing solution: There usually aren’t any formal requirements to meet when you ask a family member or friend for a loan. You and your loved one can come up with the repayment schedule for a family loan, but be sure to get things in writing so your relationship isn’t potentially damaged over misunderstandings.
Next steps
Pre-qualify for a personal loan with NerdWallet’s trusted lending partners. Just answer a few questions about yourself and your desired loan, with no effect on your credit score. You could get multiple loan offers within minutes.
After pre-qualifying, you can complete a formal loan application with whichever lender provides the best offer. Funding could be as soon as the next business day. Your first loan payment will typically be due about 30 days after the loan has been issued.
