Jun 30 2021 30 June 2021 28 August 2026 by Bernard Rivière
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How to Apply for a Personal Loan

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Given today’s circumstances, financial difficulties often push people toward a personal loan. It can also help consolidate high-interest debt or finance a major purchase. Here’s how to apply for one. Borrowing money carries certain risks and, in many cases, fees. Before applying for a loan, you should know what to expect.

How Does Applying for a Personal Loan Work?

Applying for a personal loan is becoming increasingly popular: according to some research, nearly half of adults have one. People commonly use them to consolidate or refinance debt, but they can also help fund a home renovation project, pay for a vacation, or cover the costs of moving abroad. Just make sure you fully understand the terms and conditions before taking out a personal loan, including interest rates, origination fees, and early repayment penalties.

Determine the Amount You Need Before Taking Out the Loan

The first step in choosing a personal loan is knowing how much you need:

  • Compare offers: once you know how much you need, you’ll want to research and compare rates and fees from different lenders. An easy way to get started is to use a loan comparison tool.
  • As you review a variety of loan offers using different tools, you’ll get a better sense of which loans you’re eligible for, including how much you could borrow.
  • Submitting a loan pre-qualification request is generally considered a soft pull and doesn’t count as a hard inquiry on your credit report, which could otherwise hurt your credit score.

For a simple application, you’ll need the following information:

  • Name
  • Date of birth
  • Address and tax/social security identification number
  • Annual income: including salary, wages, tips, bonuses, and other forms of income
  • Basic financial information: rent, mortgage payment, other major bills
  • Requested loan amount and ideal term
  • Gather your documents and submit the application

Once you’ve reviewed your loan options, you’ll want to make a decision and submit a complete application. Ideally, you only do this once, since it involves a hard inquiry on your credit report. The documents required vary by lender, but you’ll generally need proof of income and monthly expenses. Documents may include:

Approval can happen within an hour of submitting your application, or it can take three to five business days. If your application is approved, you can expect the loan amount, minus origination fees, to be deposited into the bank account you provided for direct deposit. If you’re taking out a debt consolidation loan, you can choose to have your funds sent directly to your credit card issuers to pay down your balances. And if you don’t sign up for direct deposit, your lender will mail you a paper check.

Once the money is deposited into your account, expect to make your first loan payment within 30 days. Make sure you’re signed up for automatic payments, you might even get a discount on your interest rate for doing so. Add your monthly payment amount to your budget so you never miss a bill, since on-time payments matter for keeping your credit score in good shape.

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