How to get prequalified for a personal loan

If you’re looking for a personal loan, prequalification is a good place to start. Since applying for personal loans can affect your credit score when inquiries appear on your credit report, it can be helpful to get quotes from multiple lenders at once.

In addition, if you’re concerned you won’t qualify, prequalification can give you insight into how likely you are to get a loan, so you don’t ding your credit score by submitting many applications.

• What is personal loan prequalification?
• Why you should get prequalified for a personal loan
• How to get prequalified for a personal loan
• Where to get prequalified for a personal loan
• Can you get prequalified for a personal loan with bad credit?

What is personal loan prequalification?

Personal loan prequalification allows you to find out if you’re likely to qualify for a personal loan, and what interest rates and repayment terms a particular lender might offer you.

Some lenders use the term prequalification and pre-approval interchangeably, but the terms can mean something slightly different depending on the lender.

When you apply for prequalification, the lender typically does a soft pull on your credit, which won’t affect your credit. The lender gets a basic picture of your financial situation and estimates how much they might lend to you.

A loan pre-approval is a more in-depth look at your finances and provides a more complete loan offer. For example, when you’re pre-approved for a mortgage loan you’ll need to provide the lender with more detailed personal and financial information.

HOW TO GET A PERSONAL LOAN

Why you should get prequalified for a personal loan

Getting prequalified for a personal loan has several advantages:

• Gives you an idea of the amount you could receive — This will let you budget and plan for the funds more easily. And if a lender prequalifies you for an amount that’s less than what you need, you can look for a different lender.
• Compare rates without hurting your credit — It’s important to compare rates from at least three to five different lenders to make sure you’re getting the best deal for your situation. Prequalifying with multiple lenders won’t affect your credit score, and it’s the simplest way to save money when you borrow.
• It’s free — Prequalifications don’t cost anything, and there’s no commitment. You can review loan offers from several lenders and choose the one that works best for you. If you change your mind, you don’t have to select any offers.

How to get prequalified for a personal loan

When seeking prequalification, follow these steps:

1. Collect necessary information, like bank statements and contact information. Use the information to fill out prequalification forms. You can apply on individual lender websites, or you can use Credible, where you can fill out your information once and get rates from multiple lenders in one place.
2. Review loan offers. Once you’ve submitted your information, review the offers from each lender and figure out which, if any, fit your financial needs. Make sure to compare loan amounts, fees and interest rates to figure out the best option.
3. Submit your application. After you’ve chosen a lender, you’ll need to complete a full application and provide additional information to the lender. Once you submit your application, the lender will run a full credit check before finalizing your offer.

If you discover during the prequalification process that you don’t qualify for a personal loan or are eligible for less than you need, you may need to ask a friend or family member to cosign or take a little time to work on your credit score before looking again.

Where to get prequalified for a personal loan

You can get prequalified for a personal loan from banks, credit unions and online lenders.

You may also consider visiting individual online lenders’ websites if you have a particular lender in mind. You may also want to consider seeking prequalification through your local bank or credit union. Many banks or credit unions offer discounted rates to current customers.

Can you get prequalified for a personal loan with bad credit?

When you have bad credit, it might feel impossible to get a personal loan. Fortunately, a number of lenders work with borrowers who have subprime credit. As a borrower with a lower credit score, you may pay higher interest rates on your loan.

In some cases, you may only qualify for a secured personal loan, where you’ll have to provide collateral to get the loan (typically a car title, expensive jewelry, or other valuables). If you fail to make your payments, the lender can take your collateral to repay the debt.

Alternatively, you could ask a trusted friend or family member to cosign your personal loan. Your cosigner should be someone with an excellent credit history. If you fail to repay your loan, the cosigner is responsible for the debt.

If you’re trying to find a personal loan and you have bad credit, focus your search on lenders that specialize in loans for subprime borrowers. While your interest rates are likely to be higher, it’s still possible to find a lender who will loan you money.

If you’re still unable to qualify for a personal loan, here are some things you can do to improve your credit:

• Pay all your bills on time. Your payment history is the biggest factor that makes up your credit score. Making your payments on-time, every time, is a great way to boost your score.
• Pay down current debt balances. This reduces your credit utilization ratio, which is how much credit you’re using compared to your total available credit.
• Increase your income. Consider taking on a part-time job or adding a side hustle to increase your debt-to-income (DTI) ratio, which is how much of your monthly income that goes toward debt payments. The lower your DTI ratio, the more likely you are to qualify for a loan.

Before applying, check your credit report for any errors and potential red flags that could make it difficult for you to qualify for a loan.