Personal loans provide quick access to cash to help you cover unexpected expenses, consolidate high-interest debt, or for any other purpose. Unlike a credit card, you receive the funds from a personal loan as a lump sum. This money is then paid back monthly over a fixed repayment term.
Below, we’ll show you what you need to know before applying, how to get a personal loan, and provide a list of the best personal loan lenders to consider.
- Personal loan requirements to know before applying
- Compare rates from top lenders
- How to get prequalified for a loan
- Alternatives to personal loans
- Frequently asked questions
Personal loan requirements to know before applying
Though personal loan requirements may vary from lender to lender, most are looking for indications that you’re a responsible borrower and won’t default during repayment. Here’s everything you should know about how to get a personal loan before submitting your application.
Borrowing amount
Because most personal loans aren’t backed by collateral, lenders typically charge higher interest to offset the increased risk of lending. Depending on your credit score, interest rates can start in the single digits and go as high as 25% or more.
Before you take out a personal loan, decide how much you need to borrow. For example, if you’re considering taking out a $10,000 loan, use a personal loan calculator to estimate your monthly payments and determine whether they fit comfortably into your budget.
Credit score, history
Your credit score helps lenders determine the likelihood that you’ll pay back the loan. Though there’s no universal minimum credit score requirement for personal loans, most lenders like to see a credit score of at least 560 or 660.
If you have no idea where you stand in terms of your credit health, head to AnnualCreditReport.com to request a free copy of your credit report from each of the three major credit bureaus, Equifax, Experian and TransUnion.
Debt-to-income ratio
Your debt-to-income (DTI) ratio is your total monthly debt payments divided by your monthly gross income. For example, if your total monthly debt is $1,500 and you earn $6,000 each month before taxes, your DTI is 25%.
Generally, the lower your DTI, the better, since it shows lenders you’re not overextending yourself financially. Though the exact requirement varies from lender to lender, most like to see a DTI below 50% for personal loans.
Employment, income verification
To ensure you have a steady income and won’t default on your personal loan, lenders will typically require you to demonstrate your employment history and current earnings by submitting documents, such as your bank statements, pay stubs, and recent tax returns.
Origination fees
An origination fee is a one-time upfront fee that many lenders charge to cover the costs of processing your loan and disbursement. The fee usually ranges between 1% to 10% of the loan amount, depending on the lender. So if you take out a $40,000 loan, anywhere from $400 to $4,000 will be subtracted from the amount you receive.
Collateral
Most personal loans are unsecured, which means they don’t require you to put up collateral. However, some lenders may offer secured personal loans for those with no credit history or poor credit.
To apply for a secured personal loan, you can use your assets, such as a car, house, or savings account, as collateral. If you default on the loan, your lender can seize and sell your collateral.
Compare personal loan rates from top lenders
A slight difference in interest rates could cost you thousands of dollars over the life of your loan. Before borrowing, compare personal loan rates from top lenders to find the best option for your needs — and be sure to judge APRs (not simple rates) to account for origination and other lender fees.
Achieve (formerly FreedomPlus)
Achieve allows you to apply for personal loans of $10,000 to $50,000 with terms of up to five years. If approved, you’ll receive the funds within 24 to 72 hours. Check with Achieve to find out what documents to provide if you’re self-employed.
Avant
Avant provides personal loans ranging from $2,000 to $35,000 with repayment terms from two to five years. Be sure to submit your two most recent years’ tax documentation if you’re applying as self-employed. If approved by 4:30 p.m. CST on a weekday, you can receive the funds as soon as the next business day.
Axos Bank
Axos Bank is available in all states and offers loan amounts of $10,000 to $50,000 with repayment terms that range from three to six years. However, their minimum credit score requirement is 700, so they might not be the best option if you have less-than-stellar credit. If you’re self-employed, you must provide tax returns from the two most recent years as proof of income.
Best Egg
Best Egg allows you to borrow anywhere from $2,000 to $50,000 and choose a repayment term of two to five years. They’re available in all states except the District of Columbia, Iowa, Vermont, and West Virginia. If you’re self-employed, check with Best Egg before applying to see what documentation you need to provide.
Discover
Discover is available in all 50 states and allows borrowers to take out personal loans ranging from $2,500 to $35,000. Self-employed individuals must prove their income by providing tax returns from the most recent years.
Happy Money
Happy Money provides personal loan amounts of $5,000 to $40,000 with repayment terms ranging from two to five years. They’re available in all states except Massachusetts and Nevada and require self-employed borrowers to provide the first two pages of IRS Form 1040 along with the first two pages of the Schedule C or K1 form.
LendingClub
At Lending Club, you can borrow as little as $1,000 and as much as $40,000. The repayment terms are three or five years, and you’ll need to submit a recent tax return to prove your income if you’re self-employed.
LendingPoint
LendingPoint offers personal loans ranging from $2,000 to $36,500 with terms from two to six years. You could qualify as a self-employed borrower if you prove that you make more than $35,000 annually.
LightStream
LightStream is a solid option if you need to borrow a large amount since you can take out loans between $5,000 and $100,000, depending on your borrowing purpose. Their minimum credit score requirement is 660, and you could get your funds as soon as the next day once approved. If you’re self-employed, check with LightStream to see what documentation you need to provide.
Marcus
Marcus by Goldman Sachs offers loans of up to $40,000 with terms between three and six years. If you’re self-employed, check with the company beforehand to see what documents you need to provide along with your application.
OneMain Financial
OneMain Financial is great for those with below-average credit since they don’t have a minimum credit score requirement. You can borrow $1,500 to $20,000 with terms of two to five years. However, if you’re self-employed, OneMain Financial may require you to put up collateral.
PenFed
With PenFed, you can borrow as little as $600 and as much as $50,000. Also, you can choose repayment terms between one to five years. Though PenFed doesn’t disclose minimum income requirements, you may need to provide some form of employment and annual income documentation if you’re a self-employed borrower.
Prosper
Prosper allows you to borrow up to $50,000 with loan terms between two and five years. Once approved, you can receive your funds within one business day. Self-employed borrowers need to prove their income by submitting bank statements or recent tax returns for verification.
Reach
Reach offers personal loans from $3,500 to $40,000 with repayment terms of two to five years, and 90% of their loans are funded within one day. If you’re self-employed, you must provide bank statements or recent tax returns showing you make at least $1,000 monthly.
SoFi
With Sofi, you can borrow $5,000 to $100,000 with a repayment term of two to seven years. If you’re self-employed, you’ll need to show proof of consistent income through bank statements or tax returns.
Universal Credit
Universal Credit offers personal loans from $1,000 to $50,000 with loan terms of three to five years. If approved, you could get your funds within one day. Self-employed borrowers should check with the company to find out what documents to provide as proof of income.
Upgrade
Upgrade has a minimum credit score requirement of 560 and allows borrowers to take out loans between $1,000 and $50,000. They’re available in all states except West Virginia and have repayment terms of two, three, five, or six years. As a self-employed borrower, you must provide your two most recent tax returns as proof of income.
Upstart
Upstart’s loan amounts are between $1,000 to $50,000, and their repayment terms are from three to five years. Submit your tax return from the previous year along with a digitally deposited check image or a business invoice to prove your income.
How to get prequalified for a personal loan
Prequalifying for a personal loan is a quick and simple way to determine your chances of loan approval. Here’s a step-by-step process of how to get prequalified:
- Assess your credit score and key factors like debt-to-income ratio
- Fill out the prequalification form on the lender’s website
- Undergo a soft credit check
- Get prequalified with multiple lenders
- Choose the offer that best fits your budget
- Submit a formal loan application with your chosen lender
Alternatives to personal loans
If you can’t qualify for an unsecured personal loan, you might consider applying with a co-signer or co-borrower, or opting for a secured personal loan. However, if you don’t think taking out a personal loan is the right financial move for your situation, here are some alternatives to consider:
Credit cards with 0% APR promotions
Instead of taking out a personal loan to tackle high-interest credit card debt, consider consolidating your debt with a 0% annual percentage rate (APR) credit card. These balance transfer cards typically offer a 0% APR during the introductory period — usually between 12 and 21 months — helping you save money on interest.
This strategy is only wise, however, if you have the cash-flow to realistically zero your balance transfer card’s balance before the 0% APR expires.
Credit card cash advance
A credit card cash advance allows you to borrow against your credit card to put cash in your pocket. One key advantage of credit card cash advances is that you can withdraw the funds you need immediately from an ATM instead of waiting days to receive the money with a personal loan. For this reason, credit card cash advances could be a solid solution if you’re in a dire situation and don’t have a debit card or cash.
However, it’s important to note that credit card cash advances are expensive. Besides the cash advance fee — typically around 3% to 5% of the amount you take out — you might also have to pay a higher interest rate on advances than what your credit card typically charges. Depending on your credit card, your APR could be as high as 25%. Again, proceed cautiously with this financing option and, ideally, avoid it if you can’t afford to quickly repay what you borrow.
Borrow from family or friends
If you have a family member or friend willing to lend you a helping hand, consider taking them up on their offer. To make both of you feel more secure, discuss setting up a repayment term and interest rate like a traditional personal loan — making sure to pay each installment back on time to avoid any issues that could affect your relationship.
As part of this repayment plan, you and your “lender” should consider how you’d each handle worst-case scenarios. That way, you can prepare and, hopefully, avoid potential damage to your personal relationship.
HELOC
A home equity line of credit (HELOC) is a revolving line of credit secured by the equity in your home. It works like a credit card, allowing you to take out money against the credit line up to a certain amount as needed. And because a HELOC is a form of secured debt, it typically has a lower interest rate than an unsecured personal loan.
HELOCs have a “draw” period and a “repayment period.” During the draw period (typically between 5 to 10 years), you can withdraw money from the credit line and only repay the interest of the amount borrowed. After the draw period ends and you enter the repayment period, you can’t withdraw any more money from the credit line, and you must start repaying both the principal and interest.
Before proceeding, be mindful that a HELOC is secured by your home, which acts as collateral. That means that defaulting on your HELOC could put your home at risk of foreclosure.
Personal loan frequently asked questions
Below we’ve answered some of the most frequently asked questions about personal loans to clear up any confusion.
- How long does it take to get a personal loan?
Depending on your lender and their policy, getting approved for a personal loan can take anywhere from a day to a week.
- What can be used as collateral for a personal loan?
Though most personal loans don’t require collateral, some lenders might provide secured personal loans. Examples of collateral for a secured personal loan include a car, a home, or cash in a savings account.
- Can you get a personal loan without collateral?
Yes, most personal loans are unsecured, so you don’t need to provide the lender with collateral or a security deposit to guarantee the loan. To qualify for an unsecured loan, you typically need at least solid credit or a cosigner who can strengthen your application.
- Can you get a personal loan without income proof?
Yes, it’s possible to get a personal loan without proof of income. However, some lenders might require that you put up collateral to gain approval for the loan.