Skip to Main Content

Personal Loan Requirements: What To Know

While personal loan requirements vary by lender, your credit score, income, and DTI are the most important factors.

Author
By Jared Hughes

Written by

Jared Hughes

Editor

Jared Hughes is a personal loan editor for Credible and Fox Money, and has been producing digital content for more than six years.

Edited by Meredith Mangan

Written by

Meredith Mangan

Senior Editor

Meredith Mangan is a Senior Editor for Personal Finance, specializing in personal loans. Since 2011, she’s helped steer content creation in the areas of mortgages and loans, insurance, credit cards, and investing for major finance verticals, including Investopedia, Money Crashers, Credible, and The Balance Money.

Updated April 19, 2024

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.”

Featured

Credible takeaways

  • Lenders assess your credit score, income, debt-to-income ratio, and other factors when deciding whether to approve you for a loan.
  • You generally need to provide proof of income, proof of address, and your Social Security number when you apply.
  • Even if you have bad credit, you may still be able to qualify for a personal loan with some lenders.

Personal loan requirements vary by lender. However, most evaluate your credit score, income, and debt-to-income ratio (DTI) to decide whether you’ll be approved for a personal loan, for what amount, and at what annual percentage rate (APR). While personal loans tend to have lower rates on average than credit cards, you may receive a higher APR if you have bad credit.

Credit score and history

Your credit score and history are influential factors in determining both loan qualification and the APR you'll get. Generally speaking, the higher your credit score, the lower your APR. The reverse is true as well. The APR represents how much a loan costs, so lower is better. 

To get a sense of how APR can impact loan costs, check out the table below. It shows average APRs by credit score based on Credible personal loan data. Data is for applicants that prequalified for a three-year personal loan.

Credit score
APR
<599
32.25%
600 to 639
30.20%
640 to 679
27.23%
680 to 719
21.84%
720 to 779
16.79%
>780
13.52%

Lenders use your score to assess how likely it is that you will repay your debt. Many have minimum credit score requirements that they use as a benchmark. For example, Axos Bank requires a minimum credit score of 700 if you apply on its website, while Avant’s minimum is 550.

A fair or poor credit score (a FICO score below 670) signifies to lenders you’ve had a difficult time with borrowing, and can make it harder to qualify. Your interest rate will likely be higher, meaning you’d pay more in interest over the life of the loan.

If your score is in the good-to-excellent credit range (above 670), lenders are more likely to consider you favorably and offer lower interest rates and better terms.

Check Out:

Credit history

Along with your score, your credit history is used by lenders to gauge your reliability when it comes to making on-time payments. This gives them an idea of the type of borrower you will be if they lend to you.

Payment history is a critical component of calculating your FICO credit score, making up 35%. Additionally, how long you’ve had credit and how long since you’ve used it is also taken into account. A longer credit history is generally a good sign for lenders as it can indicate a well-developed habit of paying off debt. Length of credit history makes up 15% of your FICO score.

Check Out: How To Build Credit

tip Icon

Good to know

You can often prequalify for a personal loan without any impact to your credit. But the final rate you get may be different than the estimate. Once you formally apply, your score may drop temporarily by up to five points.

Income and employment

When you take out a personal loan, lenders expect you to repay what you owe with income from employment or other sources. Just like your credit score, the higher your income, the better interest rates you may be eligible to receive and the more money you may be eligible to borrow.

Requirements for minimum income vary by lender. Upstart, for example, requires borrowers to have a verifiable regular source of income of $12,000 or more annually. Other lenders, like SoFi, only require you to have “sufficient” income or an offer of employment within 90 days (with sufficient income). Unfortunately, not all lenders freely disclose their minimums, so you may have to contact a representative. Even then, they may prompt you to apply instead.

Lenders also accept income from other sources, like Social Security payments, spousal support, or alimony. To verify your income, lenders will typically request documentation such as pay stubs, recent bank statements, or W-2s.

Debt-to-income ratio

Your debt-to-income ratio (DTI) is how much of your monthly income goes toward paying off debt. Lenders use this metric to determine if you are able to afford an additional payment each month. Most lenders prefer a maximum DTI of 35% or less. Anything more can signal that too much of your income is going toward debt payments, which can be unsustainable in the long term.

To calculate your DTI, first add up your minimum monthly payments. Then, divide that by your gross monthly income, which is how much you make before taxes and deductions have been taken out.

Let’s do a real-world example so you can see the calculation in action.

Say you have an income of $5,500. Let’s add up the monthly payments:

  • Rent: $1,200
  • Auto loan: $450
  • Student loans: $150
  • Personal loan: $300
  • Credit cards (minimum payment): $160

Together this comes out to $2,260. Now, divide that by $5,500, then multiply the result by 100 to get a percentage.

In this example, your DTI is 41%.

While your hypothetical DTI is over what most lenders prefer, it doesn’t necessarily mean you’d be disqualified. There may be some lenders who will work with a DTI slightly over the maximum, as each lender has different limits.

Check Out: How To Pay Off Credit Card Debt

Collateral requirements

Personal loans are typically unsecured, which means you don't need to provide collateral to get one. But if your credit is preventing you from qualifying for a good APR (or qualifying at all), you might consider a secured personal loan. Secured personal loans require collateral, like your car or a savings account, to secure the loan. A secured loan can net you a good rate if your credit is bad, but your collateral could be seized if you default.

Check Out: Secured vs. Unsecured Personal Loans

General requirements

In addition to credit and income requirements, you’ll generally need the following:

  • U.S. citizenship (this can vary by lender)
  • Proof of address (such as your lease or utility bills)
  • To be at least 18 years old
  • Social Security number or taxpayer identification number (TIN)
  • Proof of income (such as W-2s or pay stubs)

Depending on the lender, it may also have additional requirements not stated here.

Check Out: Personal Loans for Non-U.S. Citizens

Compare personal loan rates

Advertiser Disclosure
4.24.2

Credible rating

Fixed (APR)

6.99% - 25.49%

Loan Amounts

$5000 to $100000

Min. Credit Score

700

Check Rates

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

7.80% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

620

Check Rates

on Credible’s website

View Details