How to Get a Personal Loan in 7 Steps

Shopping for a personal loan doesn’t have to be complicated. Understanding how to get a personal loan — including where to start, what you need to apply and how to compare offers — can help you select the best personal loan.

Below are seven steps to help you navigate how to get a personal loan.

1. Check your credit

Before you take out a loan, check your credit score to assess your financial picture. A high score gives you a better chance of loan approval and a lower interest rate.

» How's your credit? Check your score for free with NerdWallet

Be sure to make on-time payments toward your existing debt and keep your credit utilization low, as these are the biggest factors affecting your score.

Also, review your credit report and dispute any errors that might be dragging your score down, such as wrongly reported missed payments. You can request a credit report from each of the three major credit bureaus — Equifax, Experian and TransUnion.

2. Decide how much you need to borrow

Determine how much you must borrow to meet your financial goal, and aim to borrow that amount and no more. Requesting too large of a loan could lead a lender to reject your application. Even if you are approved for that amount, your payments may be hard to manage.

Before you apply for a loan, find out if the lender has a one-time charge called an origination fee. A typical origination fee is 1% to 10% of the loan amount, though not all lenders impose this charge.

Lenders often deduct the origination fee from your loan before sending you the funds. You may need to request a higher loan amount than you actually need in order to cover the cost of the origination fee.

For example, say you want to borrow $19,000 to consolidate credit card debt, but the loan comes with a 5% origination fee. You should request a $20,000 personal loan so that after the lender deducts the 5% — or $1,000 — for the origination fee, you’re still left with $19,000 to consolidate your debts.

» MORE: Compare loans with no origination fees

3. Calculate your loan payments

Knowing your estimated monthly payments can help you decide whether you can afford to take out a loan. In order to calculate your estimated loan payment amount, you’ll need an idea of what your annual percentage rate and loan term might be.

Each lender has its own unique underwriting process to determine the annual percentage rate on a loan. But you can use your credit score to get an approximation of what rate a lender might charge. APRs for personal loans typically range from about 7% to 36%. If your credit score is high, expect an APR on the lower end of that range. If your credit score is low, you'll likely be offered a higher APR.

Next, think about how long you’ll need to pay off the loan. Loan terms commonly range from two to seven years. A longer loan term means lower monthly payments, but you’ll end up paying more in total interest costs.

Once you know your loan amount, rate and term, plug those figures into our personal loan calculator to determine your estimated monthly payments.

Personal loan calculator

4. Compare lenders and pre-qualify

You can get a personal loan from online lenders, banks and credit unions, but some lenders work better for certain borrowers and loan purposes than others.

For example, some lenders offer features to help specifically with debt consolidation. Others specialize in lending to borrowers with bad credit.

Research different lenders to find one that’s best for your needs. Here are a few key features to compare between lenders.

• Credit score requirements: Online lenders tend to offer loans to borrowers with credit scores across the spectrum, while banks often require good to excellent credit. Credit unions are more likely to accept loan applications from bad-credit borrowers if they have an account in good standing.

• Loan amount and repayment term availability: Loan amounts and repayment terms vary by lender. Loan amounts typically range from $1,000 to $100,000, and terms often span from two to seven years. Look for lenders with loan amounts and repayment terms that match your borrowing needs.

• Funding time: You can expect to receive funds within a week after loan approval. If you need the money right away, look for a lender that provides same-day or next-day funding. Online lenders may provide the fastest funding times.

• Co-signed, joint and secured loan availability: Some lenders will allow you to add a co-signer or co-borrower to your loan application or pledge collateral to secure a loan. Opting for a co-signed, joint or secured loan may help you qualify or get a lower rate.

» MORE: Online vs in-person loans

Once you’ve identified a few ideal lenders, complete their pre-qualification process to check your likelihood of approval and preview rates and terms. Pre-qualifying for a personal loan typically involves a soft credit check, which won’t impact your credit score.

Pre-qualifying with multiple lenders allows you to compare loan offers and choose the best one. The loan with the lowest APR is generally the least expensive loan.

5. Select a lender and complete your application

After deciding which pre-qualified offer is best for you, it’s time to formally apply for the loan. Application requirements vary by lender, but you’ll likely need:

• Identification: A passport, driver’s license, state ID or Social Security card.

• Verification of address: Utility bills or lease agreement.

• Proof of income: Pay stubs, bank statements or tax returns.

The lender will run a hard credit check that will likely decrease your credit score by a few points. Hard inquiries can show up on credit reports for 24 months, but they won’t affect your credit score after 12 months.

Some lenders provide an immediate loan approval decision, while others may take a couple days. Be wary of lenders that promise guaranteed approval without reviewing any of your personal or financial information. It could be a scam.

» MORE: Know the signs of personal loan scams

6. Read the fine print

Once you’ve been approved for a loan, carefully read over the terms before signing the loan agreement. In particular, watch for:

• Fees. Lenders may charge fees for late payments or if you don’t have enough funds in your bank account when you authorize a payment. Prepayment penalties — fees for paying off a loan early — are rare, but you should check the loan agreement to see if they’re included.

• APR surprises. The total cost of your loan, including interest and any origination fees, should be clearly disclosed and figured into the APR.

• Automatic withdrawals. If a lender automatically withdraws loan payments from your checking account, consider setting up a low-balance alert with your bank to avoid overdraft fees.

• How extra payments are applied. Check if any extra loan payments you make throughout the month are applied to the loan principal only. Not all lenders allow principal-only payments, but this saves you money on interest and helps you get out of debt faster. 

• Hardship options. Some lenders offer personal loan deferment programs that let you skip or lower payments if you experience financial hardship, like a job loss or illness.

7. Sign loan agreement and get funded

The final step to getting a personal loan is to sign the loan agreement. Some lenders will send the funds the same or next day after the paperwork is signed, while others can take up to a week to process funding.

» MORE: How long does it take to get a personal loan?

Once you have your funds, make a plan to manage your personal loan payments. Your first payment will likely be due about 30 days after the loan is funded.

Setting up automatic payments can help you pay on time without having to remember any due dates. Some lenders even offer rate discounts if you set up automatic payments.