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How To Get a Personal Loan in 6 Steps

To get a personal loan, you’ll need to check your credit, determine a loan payment you’re comfortable with, and compare options before you apply.

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By Erin Gobler
Erin Gobler

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Written by

Erin Gobler

Freelance writer

Erin Gobler has covered personal finance for more than 10 years, with expertise on mortgages, student loans, and credit cards. Erin's work has been featured by Fox, Business Insider, GOBankingRates, Newsweek Vault, and CNN.

Edited by Meredith Mangan
Meredith Mangan

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Meredith Mangan

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Meredith Mangan is a senior editor at Credible. She has more than 18 years of experience in finance and is an expert on personal loans.

Updated March 31, 2025

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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If you’re going to apply for a personal loan — or are just thinking about it — there are some things to take care of first, such as checking your credit, researching loan options, and determining what monthly payment makes sense for you.

By understanding how personal loans work and the process of getting one, you’ll be in a good position to find the best personal loan for you.

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How do personal loans work?

A personal loan is an installment loan with a fixed interest rate — you receive it in a lump sum and then repay it in equal monthly installments, usually over a period ranging from one to seven years. The average annual percentage rate (APR) on a two-year personal loan was 12.32%, according to the Federal Reserve.

Personal loans are usually unsecured, which means you don’t have to pledge an asset like your car or home as collateral. As a result, the loan approval process can be quick, and you could be approved and get the funds as soon as the same day you apply, depending on the lender. 

However, because there’s no collateral, the lender takes on more risk, which means a higher rate for you relative to secured loans like a home equity loan or auto refinance. Some lenders offer secured personal loans, which may be a good choice if you can’t qualify for a loan based on your credit score, income, or debt-to-income ratio (DTI). On the other hand, secured personal loans can involve more risk for you. If you can’t make your payments, the lender can seize the asset you pledged as collateral.

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The annual percentage rate includes both the interest rate and any upfront fees, such as an origination fee, making it a more effective measure of a loan’s cost than the interest rate alone.

You can use a personal loan for just about any purpose. Popular reasons for getting a personal loan include debt consolidation, home renovations, large purchases, and covering unexpected or emergency expenses.

Learn More: How Do Personal Loans Work?

1. Check your credit score

Your credit score is one of the most important factors lenders look at when you apply for a personal loan. It helps determine whether you qualify for a loan in the first place, as well as the interest rate you’ll pay on your loan.

FICO credit scores range from 300 to 850 and fall into the following ranges:

  • Less than 580: Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very good
  • 800 or more: Exceptional

Many lenders have minimum credit score requirements to qualify for a personal loan, but you have the best chance of qualifying if you have at least a good credit score. Additionally, while there are lenders that offer loans to borrowers with fair or poor credit scores, the best scores are generally available to borrowers with very good or exceptional scores.

Before applying for a personal loan, be sure to research lenders’ credit score requirements. Applying for a loan can temporarily reduce your credit score, and the last thing you want is to see your credit score go down after applying for a loan you aren’t approved for.

Check Out: How To Build Your Credit: A Step-by-Step Guide 

2. Determine how much money you need

The next step of the personal loan process is deciding how much you need to borrow. When considering how much to borrow, there are several things to keep in mind.

First, think about how much you need to borrow. A personal loan is an installment loan, which means that once it’s approved and you receive the funds, you can’t get more without applying for a new loan. Because of that, it’s important to borrow enough to cover all of the costs.

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Avoid borrowing too much money. Keep in mind that every dollar you borrow will have to be repaid. The more you borrow, the higher your monthly payments will be.

For example, if you borrow $10,000 with a three-year repayment term and an interest rate of 13%, your payments will be roughly $337 per month. But a loan with the same terms and an amount of $15,000 would result in monthly payments of nearly $170 more. That’s an extra $170 you’d have to make room for in your budget.

Not only that, but the more money you borrow, the more you’ll pay in interest over the life of the loan. In our example above, comparing a $10,000 to a $15,000 loan, the higher loan amount would result in nearly $1,000 more paid in interest over the life of the loan.

Ultimately, you must make sure the amount you request from a personal loan is high enough to cover the necessary costs, but not so high that it exceeds your ability to comfortably repay it.

Check Out: Personal Loan Term Length: What You Need To Know

3. Research lenders and loan options

Before applying for a personal loan, make sure to thoroughly research your loan options. There are many highly-rated personal loan lenders, and it’s important to find one that best meets your needs.

When choosing a lender, there are generally three types to choose from: traditional banks, credit unions, and online lenders. Each of these options has its own pros and cons. A traditional bank or credit union could be a good option if you already have a relationship with that financial institution, such as having your accounts there or having previously borrowed from them.

Online lenders also have some major advantages. Because they don’t have physical locations, their overhead tends to be lower, which can result in lower fees and interest rates for borrowers. Additionally, some have more lenient eligibility requirements and offer loans to borrowers with poor or fair credit.

It’s helpful to decide ahead of time what you need when it comes to your loan amount and repayment term, as well as your credit score and your desired APR. Knowing these factors upfront can help you narrow down your lender options quickly.

4. Prequalify with multiple lenders

Many lenders allow you to prequalify for a personal loan, meaning you’ll go through a soft credit check to determine whether you’re likely to qualify for a loan and what your estimated APR, amounts, and terms are. 

Because prequalification doesn’t negatively affect your credit score, it presents an opportunity to shop around with different lenders to see which could offer the best option for you. Just remember that a prequalification quote isn't an offer of credit. The rates and terms of an actual loan offer may differ from what you see during prequalification.

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Once you move forward with a formal application, you’ll have to go through a hard credit inquiry that may lower your credit score temporarily.

Check Out: What Is Debt-to-Income Ratio?

5. Compare lenders

Once you’ve prequalified with multiple lenders, you’re almost ready to apply for your loan. You can take the loan offers you’ve received from each lender to decide which is the best fit.

Some factors to keep in mind when deciding between lenders are:

  • Loan amounts
  • Repayment terms
  • APR
  • Credit score requirements
  • Income and DTI requirements

In most cases, the best lender is the one that offers the loan amount and repayment term you want at the best rate. However, don’t overlook fees. A high origination fee or other fees could overshadow small savings in interest, so it’s important to run all the numbers.

Check Out: Best Personal Loans With No Origination Fee

6. Apply for a personal loan

The final step in getting a personal loan is completing the application process. First, the application process usually involves completing an online form. The lender is likely to ask for information and/or documentation about your:

  • Credit history (including your SSN for a credit check)
  • Employment
  • Income (including pay stubs, tax returns, or W-2s)
  • Assets (including bank or investment account statements)
  • Other debts
  • Government ID, such as birth certificate, driver’s license, etc.

Depending on the information you provide, the lender may approve your application right away. This is more likely for borrowers with excellent credit and a high income. However, it could also be that the lender needs additional time to look over your application. In that case, you could wait up to a week for a response.

Learn More: How Long Does It Take To Get a Personal Loan?

What to do if your loan application is rejected

Depending on your credit score, income, or the contents of your credit report, it’s possible that your personal loan application will be denied. In that case, you have several options for how to proceed:

  1. Review your credit report for errors: In a 2024 Consumer Reports study, 44% of people who checked their credit reports found at least one error. If there are inaccurate negative marks on your credit report, you could quickly boost your score by having them removed. You can do so by disputing them directly with the credit bureaus.
  2. Improve your credit score: Before applying for another personal loan, consider spending some time boosting your credit score. The best ways to do this are by improving your payment history and reducing your credit utilization, as those are the most important factors that make up your credit score.
  3. Consider other lending options: There are many personal loan lenders to choose from, some of which offer loans to borrowers with poor and fair credit. If you’ve been denied a loan from one lender, you may qualify for a personal loan from another.

Learn More: What to Do if You're Denied a Personal Loan
 

FAQ

What makes me eligible for a personal loan?

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Disclosure: Some lending partners that participate in Credible’s comparison marketplace offer loans to borrowers with scores as low as 550. Borrowers with low scores will have fewer lending options than borrowers with higher credit scores.

Meet the expert:
Erin Gobler
Erin Gobler

Twitter

LinkedIn

Erin Gobler has covered personal finance for more than 10 years, with expertise on mortgages, student loans, and credit cards. Erin's work has been featured by Fox, Business Insider, GOBankingRates, Newsweek Vault, and CNN.