How the personal loan approval process works
There are three basic steps to being approved for a personal loan: Applying, waiting for approval and receiving your funds. Ideally, you will take the time to shop around before doing any of these. Here's a breakdown of what you can expect at each step.
Prequalification
Though not technically part of the personal loan approval process, prequalification is an optional — but strongly recommended — first step when applying for a personal loan. Many lenders have online prequalification forms you can fill out and submit within a few minutes. If you prequalify, you'll receive an estimate of the loan you might be able to get with a proposed maximum loan amount, annual percentage rate (APR), loan repayment term and monthly payment.
Application
If you want to move ahead with a quote, the next step is to apply for a loan. The full application often involves a hard credit check and requires you to verify your identity, employment and income. Lenders may also ask for supporting documents at this stage, such as a copy of your government-issued identification card, bank statements, pay stubs or tax returns.
Review
When lenders review your application, they're looking for reassurance you'll be able to pay back the loan as promised. As such, the approval process involves the lender reviewing your credit profile, income and debts to see if you meet its qualifications. Lenders also look for red flags like missed payments or defaults.
After you complete a full application, the lender will review your submission and make its decision.
Funding
If you get approved, the final step is to review the loan contract and sign it. Many lenders invite you to do this online through a service like Docusign. Once you sign, the lender will send you a copy of your contract and start the disbursement process. The funds are often sent to your bank account within a few business days, or to your creditors if you're consolidating debt.
Amount of time each step takes Application (less than an hour)
The application stage of the personal loan process can be very quick. If you prequalify and want to go through with a full application, you can often complete this in less than an hour.
It may take longer, however, if you're applying with a lender that doesn't have a completely digital process or if you're required to submit more complex documentation. For example, if you're self-employed, you'll likely need to provide proof of multiple sources of income,
Approval (seconds to days)
After submitting a personal loan application, some lenders will provide you with an approval decision within seconds. Many have systems that vet applicants automatically. But if your application returns a red flag, the institution may want to manually review it. And some still manually review applications as a matter of course, which can take anywhere from a few hours to a few business days.
Funding (same day to three business days)
If you're approved, the time it takes for a lender to disburse the loan varies. Some institutions can send funds as soon as the same day you apply and are approved, while others take several business days. Many lenders disclose typical funding times on their sites or on lender marketplaces. If getting a loan quickly is important to you, research lender funding times before you apply.
Loan funding time by lender
Certain types of lenders tend to be faster than others.
Online lenders
Online lenders provide streamlined virtual processes for applying as well as some of the fastest funding times after approval, ranging from same-day funding to three business days post-approval in many cases. To get funding the same day you apply, you'll need to find a lender that offers it and meet its same-day funding deadline.
Examples (same-day lenders)
Advertiser Disclosure
Overview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 20 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 20 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the same business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full review
Overview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee in exchange for a lower rate
Eligibility
Available in all states
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Read full review
Overview
Zable offers relatively small loan amounts — ranging from $1,000 to $35,000 — that can be deposited in your account as soon as the same day you are approved, if it is by the lender's deadline. It’s an option for fair-credit borrowers, with a minimum credit score of 600, as well as those with lower incomes.
Its origination fees range from 5% to 9%, however, and it does not offer discounts, secured loans, nor the option to add a cosigner to your application. Zable also currently does not offer loans in 21 states.
Fees
Origination fees (5% to 9%)
Eligibility
Not available in CO, CT, IN, KS, LA, ME, ND, NE, NH, NJ, NV, OK, OR, PA, RI, SC, SD, VT, WV, WI, or WY
Loan uses
Debt consolidation, credit card refinancing, home improvement, major purchase, car financing
Read full review
Overview
Reach is an option if you have fair credit, especially if you need money fast. According to the company, 90% of Reach personal loans are funded within one day of approval.
It's a good choice for debt consolidation and credit card refinancing, but borrowers with excellent credit may not find the lowest rates with Reach. The company also charges more fees than some of its competitors and doesn't offer direct pay or autopay discounts. If you need a 7-year term loan, you'll need to look elsewhere. Reach personal loans are not available in all states.
Fees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Read full review
Buyside does not make or arrange loans.
Banks
Banks' funding times often range from one business day to a week. Most banks will disburse your loan via ACH transfer to a linked account, but some will also support receipt to an external account or in the form of a check. Funding times are often quicker and may be same-day if you're already a customer.
Examples
Lender
Funding time
Wells Fargo
One to three business days (must be a Wells Fargo customer for 12 months to apply)
Citi
Up to two business days (same-day for existing customers)
U.S. Bank
One to four business days (same-day for existing customers)
Credit unions
Credit unions require an extra step: You have to be a member before you can take out a loan. But once you've joined, you may be able to get same-day or next-day funding.
Examples
Lender
Funding time
Navy Federal Credit Union
Same-day access to funds
PenFed Credit Union
Next-day funding
Alliant Credit Union
Same-day access to funds
Personal loan requirements
You'll have to meet a lender's eligibility requirements to qualify for a loan. The exact qualifications you need to meet vary between institutions, but most consider the following factors:
Credit scores
Lenders check your credit score to get a general idea of how you've managed credit accounts in the past. Your credit score provides a snapshot of your creditworthiness, or how likely you are to repay money you borrow, based on your full credit file. Many lenders require applicants to meet a certain minimum credit score to be considered for a personal loan. For example, Achieve requires a minimum FICO credit score of 620.
Lenders also look beyond just your credit score by checking your full credit reports from one or more of the consumer credit bureaus—Equifax, Experian and TransUnion—to learn more about how responsible you are with debt. For example, they'll consider your payment history, credit utilization, debt load, public records such as bankruptcies and recent inquiries for credit.
Income
Your income helps lenders gauge the monthly loan payment and total loan you can afford. Some lenders have specific minimum income requirements, such as Discover, which requires you to receive at least $25,000 per year in household income.
Lenders often want to know about your employment so they can gauge the stability of your income. They'll typically ask if you're employed, what type of employment you have (e.G., self-employed, part-time employment, full-time employment, retired, etc.) and how much you earn. You often need to provide proof of income as well in the form of pay stubs and/or tax documents.
Debt
The amount of debt you have determines how much of your income is available for a new loan payment and how much of it is already tied up. Your debt-to-income ratio (DTI) represents the amount of debt you already have as a percentage of the amount of money you earn before taxes. Personal loan lenders often prefer a DTI no higher than 36%.
Housing costs can significantly reduce the amount of income you have available for loan payments. Lenders may also ask how much you pay per month for housing and whether you rent or own.
Age and citizenship status
You must be of legal age in your state, which is generally 18 or older, to get a loan.
Lenders typically have citizenship and/or residency requirements as well. For example, you may need to be a U.S. Citizen, permanent resident or non-permanent resident alien with a valid government-issued ID who is living in the U.S. However, some lenders offer personal loans for non-U.S. Citizens with valid visas and credit histories, and some also extend loans to nonresidents.
Bank account and contact information
Finally, you'll often need to have an active bank account where you can receive the loan funds, and most lenders require a valid email address for electronic communications and registration.
Tips to streamline the personal loan approval process
If you're looking to get a loan as quickly as possible, here are a few tips that may help to speed up the process:
Check your credit: Check your credit reports and scores to find out where you stand. AnnualCreditReport.Com is a reputable source you can use to get free copies of your credit reports. Dispute any errors you find with the appropriate bureau(s), and narrow your search to lenders that cater to borrowers with credit profiles similar to yours. It’s important to ensure you’re using a reputable site, as the Federal Trade Commission has warned of companies offering free reports as a pretense for collecting personal information that could potentially be misused.
It’s important to ensure you use a reputable site to check your credit. The Federal Trade Commission has warned of companies offering free reports as a pretense to collect personal information that could be misused.
Calculate your income: Check your financial records to find out how much income you're making per month and year. Ensure the amount you claim on your personal loan application is exact and matches your proof of income documents to avoid causing delays.
Look for fast funding: If time is of the essence, look for lenders that make fast funding a priority, like those that can disburse the money within a business day. Check with institutions where you already have accounts as well as online lenders with snappy platforms.
Look for streamlined online approvals: Look for lenders that make an effort to optimize the personal loan application process, like through a 100% online experience.
FAQ How easy is it to get a personal loan?
Many lenders offer convenient online applications and approval processes, so applying for a loan can be fairly simple and quick, especially if you have good or excellent credit. However, each lender has its own qualification requirements you must meet to be approved. This will likely be more difficult if you have fair or bad credit, though some lenders work with borrowers in those ranges.
What credit score do you need for a personal loan?
There's not a specific credit score that all lenders require for personal loans. Eligibility requirements vary from one lender to the next, with some setting specific score minimums and others not drawing hard lines. You'll find that some lenders require at least good credit (a FICO score at or above 670), while others are more lenient.
What are personal loans used for?
Personal loans are designed to help borrowers cover personal expenses, such as the costs of home improvements, debt consolidation, emergencies, weddings, moving and funerals. However, lenders often place restrictions on how funds can be used. Personal loans typically can't be used to cover college tuition, gambling, investing, illegal purchases or down payments on a home.
How big of a personal loan can I get?
The amount you can borrow with a personal loan depends on the lender's maximum loan amount and your qualifications. Lenders typically weigh factors such as your credit profile, income and DTI when deciding how much to lend you. You may be able to get an estimate of the amount you can borrow by prequalifying, but prequalification does not guarantee approval.
Will my credit scores decrease if I get a personal loan?
Your credit scores could temporarily decrease when you get a personal loan. Most lenders perform a hard credit inquiry during the application process that typically causes your credit score to drop by five points or less. A new loan with a largely outstanding balance can also cause decreases due to a drop in your average credit account age and an increase in your total debt. But responsible management of a personal loan (making timely, consistent payments) can help boost your score in the long run.