How to get a personal loan in 7 steps

After figuring out how much you need to borrow, prequalify with various lenders to comparison shop without affecting your credit.

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By Mary Beth Eastman

Written by

Mary Beth Eastman

Writer

Mary Beth Eastman is a Credible authority on personal finance. Her work has been featured by The Balance, Money Under 30, and more.

Edited by Kelly Larsen

Written by

Kelly Larsen

Editor

Kelly Larsen has written and edited content that spans many personal finance topics, including buying a home, saving for retirement, and paying off student loans. She first started learning about the world of finance through her work at Finance101.com. In 2020, Kelly helped launch Paven, a financial well-being app.

Updated May 8, 2024, 2:56 PM EDT

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A Consumer Affairs survey conducted in 2023 found that 40% of Americans said they needed a loan, and 31.3% said they had looked into one in the past year. If you need a loan to consolidate debt, fund a big purchase, or cover an emergency expense, knowing how to get a personal loan can streamline the process and help you find the best option for your situation.

1. Determine how much you need to borrow

The more money you borrow, the more your loan will cost. That’s why it’s important to determine the loan amount you need before applying. For example, using the average interest rate for a two-year loan, loan costs would be:

Loan amount
Interest rate
Loan cost
$5,000
12.49%
$676
$10,000
12.49%
$1,353
$15,000
12.49%
$2,029

Prequalify to get a sense of the interest rate you might pay and then use a personal loan calculator to project loan costs. The higher your interest rate, the higher your loan amount, or the longer your loan term, the more you’ll pay.

But interest costs aren’t the only thing to keep in mind. Some personal loan lenders charge an origination fee or other upfront fee, which covers the processing of your loan application. Lenders typically subtract the origination fee from the loan funds before they make it to your account, so you’ll receive less than you applied for.

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For example

If you borrow $3,000, but the lender charges a 5% ($150) origination fee, you’d receive $2,850, but would repay the full $3,000, plus interest.

If the lender you choose charges origination fees, take that into account when deciding how much to borrow.

Check out: Best personal loan rates

2. Check your credit

Your credit score is used by lenders to gauge how reliable you are when repaying debts — the higher your score, the better your reputation. You’ll also typically qualify for better APRs on personal loans.

Finding out your score will help you know where you stand, since some lenders disclose their minimum credit score requirements. Most lenders prefer FICO scores in the “good” range, above 670. But there are some who specialize in lending to borrowers with fair and bad credit.

FICO credit scores fall within these ranges:

  • Poor: Below 580
  • Fair: 580 to 669
  • Good: 670 to 739
  • Very good: 740 to 799
  • Exceptional: 800 and above

You can pull your credit score for free weekly from AnnualCreditReport.com. Check your credit report for any errors. If you find mistakes, report them to the appropriate credit bureau (Equifax, Experian, or TransUnion) as they could be dragging down your score.

Check out: How to pay off debt fast

3. Determine the repayment term you need

Your repayment term is the amount of time over which you’ll repay your loan, in monthly installments. While a longer term can mean a lower monthly payment, it can also mean more interest costs over time. Here’s how the cost of the $10,000 loan with a 12.49% APR from earlier would break down:

Loan amount
Loan term
Interest rate
Monthly payment
Loan cost
$10,000
3 years
12.49%
$334
$2,042
$10,000
5 years
12.49%
$225
$3,496
$10,000
7 years
12.49%
$179
$5,049

4. Compare personal loan lenders

Once you know your credit score, you can use it to narrow down your lending options. You can get personal loans from banks, credit unions, and online lenders, but it’s important to shop around to make sure you’re getting the best terms.

Here are some factors to consider when comparing lenders:

  • Loan amounts: Some lenders allow you to borrow as much as $100,000 or more, but loan maximums around $50,000 are more common. Maximum loan amounts are typically reserved for borrowers with excellent credit and incomes.
  • APRs: Lenders will generally list their minimum and maximum annual percentage rates (APRs) on their websites. In general, rates for personal loans range from around 7% for those with excellent credit to 36% for those with fair and poor credit.
  • Repayment terms: Some lenders are more limited than others when it comes to repayment options, but typical repayment terms range from two to seven years. Remember that, while a longer term can mean lower monthly payments, it often means more spent on interest.
  • Fees: Make sure you’re aware of any fees a lender may charge, such as origination fees, late fees, and insufficient funds fees, whether upfront or not.
  • Discounts: Some lenders offer APR discounts for things like enabling automatic payments or allowing direct payments to creditors, in the case of debt consolidation. For example, Lightstream offers a 0.50 percentage point discount if you enable autopay prior to loan funding.
  • Minimum credit score: Many lenders have minimum credit requirements listed on their websites, which can help you gauge whether or not you’re likely to be approved.
  • Lender reputation: Consumer review websites like Trustpilot and the Better Business Bureau can help you gather information on the reputation of a lender.
  • Cosigner acceptance: If you plan to use a cosigner to strengthen your application, you’ll need to limit your search to lenders that allow them.

Compare personal loan rates

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Fox Money rating

Fixed (APR)

6.99% - 25.49%

Loan Amounts

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Min. Credit Score

700

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7.80% - 35.99%

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$1000 to $50000

Min. Credit Score

620

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$2500 to $40000

Min. Credit Score

660

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4.54.5

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8.49% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

600

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8.98% - 35.99%

Loan Amounts

$1000 to $40000

Min. Credit Score

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8.99% - 35.99%

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$2000 to $50000

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600

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9.95% - 35.99%

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$2000 to $35000

Min. Credit Score

550

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Loan Amounts

$5000 to $35000

Min. Credit Score

700

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11.69% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

560

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11.72% - 17.99%

Loan Amounts

$3000 to $40000

Min. Credit Score

640

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Loan Amounts

$20000 to $200000

Min. Credit Score

660

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14.30% - 35.99%

Loan Amounts

$3500 to $40000

Min. Credit Score

640

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18.00% - 35.99%

Loan Amounts

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Min. Credit Score

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A note on APR

The total cost to borrow, inclusive of upfront fees like origination fees, is represented by the annual percentage rate (APR), which is why it’s best to compare APRs between lenders.

Check out: Best online loans

5. Prequalify for a personal loan

Prequalifying for a personal loan lets you compare estimated rates, amounts, and terms from different lenders. It doesn’t involve a hard inquiry (also known as a hard credit check), so it won’t affect your score. Just know that it's not an offer of credit, and your credit score may temporarily dip once you apply for a loan.

It’s a good idea to prequalify for loans so you have a better idea of the terms you’ll be offered. To prequalify, you’ll need to fill out and submit a form with some personal information, such as your name, Social Security number, and date of birth.

Note that prequalification is not an offer of credit, and the final rate you receive may be higher. 

Learn more: What is personal loan pre-approval?

6. Apply for a personal loan

Once you’ve compared at least a few lenders, pick the one that looks like it will fit your needs the best and fill out a formal loan application. When you apply, you’ll need to provide personal information, such as your name, phone number, and address, as well as information about your employment and income. A lender may require you to submit copies of your recent pay stubs or W-2s as proof of income, as well as bank account information for direct deposit.

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Important

A loan application triggers a hard inquiry, which means it’ll affect your credit score. Your FICO score will likely drop by less than five points, however, and hard inquiries only factor into your score for a year.

Because each loan application causes a hard pull on your credit, it’s best not to apply with a bunch of different lenders at different times. It’s best to prequalify, compare your rates, and then pick one lender and apply with that one.

7. Review the loan agreement before signing

Once you apply, the lender will review your application and check your credit. It can take several days to find out if you’re approved for the loan, although some lenders may be able to approve you the same day.

If you are approved, you’ll need to sign your loan documents so you can receive your funds. Then your lender will deliver the money directly into your bank account (or by check or debit card) within one day to a week. The timing depends on the lender. You may even be able to get the funds the same day.

Next, you start repaying the loan. Your lender will provide you with all of the loan details, including the first payment due date.

Check out: Best fast personal loans

What to do if you’re denied a personal loan

Getting denied for a personal loan can be discouraging, but working out what caused your application to be denied can help you improve your chances for next time.

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Good to know

Provided you ask within 60 days of the decision, you have the right to request reasons for denial from the lender. A low credit score, insufficient income, and/or a high debt-to-income ratio are all common reasons an application may be denied.

If you need the funds right away, you can try and strengthen your application by finding a lender that accepts cosigners and enlisting one with strong credit. (A cosigner agrees to make payments if you don’t, but has no access to the loan funds.) You could also look into collateral loans, which are secured by property that the lender can seize if you miss payments.

Check out: Best personal loans with a cosigner

How to get a personal loan FAQ

Can you get a personal loan with bad credit?

Yes, you can get a personal loan with bad credit. It’ll likely be more challenging (and expensive) than it is for someone with strong credit, because many lenders have minimum credit score requirements that are in the good to excellent range, or a FICO score above 670. But there are lenders who specialize in lending to borrowers with bad or fair credit. These lenders take other factors into consideration when reviewing your loan application, such as your education or employment history.

How can I improve my credit score?

Since payment history makes up 35% of your FICO score, making personal loan payments regularly and on time can help you improve your credit. Paying down balances to keep your credit utilization ratio under 30%, reviewing your credit report for errors and disputing any mistakes, and only applying for new credit accounts when you really need them are all also best practices.

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Meet the contributor:
Mary Beth Eastman
Mary Beth Eastman

Mary Beth Eastman is a Credible authority on personal finance. Her work has been featured by The Balance, Money Under 30, and more.

Fox Money

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Fox Money is a property of Credible Operations, Inc., which is majority-owned indirectly by Fox Corporation. This material may not be published, broadcast, rewritten, or redistributed. All rights reserved. Use of this website (including any and all parts and components) constitutes your acceptance of Fox's Terms of Use and Updated Privacy Policy | Your Privacy Choices.