How to Get a Personal Loan

Step 1 Know What Personal Loans Are (and Are Not) For

Personal loans are unsecured installment loans -- meaning no collateral is required and you repay in fixed monthly payments over a set loan term, typically 27 years. They work well for debt consolidation, large one-time expenses (medical bills, home repairs, weddings), and situations where you need a lump sum at a fixed rate.

They are generally a poor choice for ongoing expenses, vacations, or anything you could save up for in a few months. Because they are unsecured, lenders charge higher rates than secured loans like mortgages or auto loans -- so the use case matters.

Step 2 Check Your Credit Score First

Your credit score is the single biggest factor determining your interest rate. Check it before you apply -- this lets you know which lenders to target, whether to spend a few months improving your score first, and what rate range to expect.

You can check your score for free through your bank, credit card issuer, or sites like Credit Karma. If your score is below 640, consider improving it before applying -- even a 40-point improvement can cut your rate significantly.

Step 3 Prequalify With Multiple Lenders

Most lenders offer prequalification using a soft credit pull -- this shows you estimated rates and terms without affecting your credit score. Always prequalify with at least 35 lenders before submitting a formal application. The rate differences between lenders for the same borrower can be substantial.

Where to look: online lenders (SoFi, LightStream, Marcus, Discover), credit unions (typically the best rates for members), and your existing bank. Each has different strengths -- online lenders are fast, credit unions often have the lowest rates, banks are convenient if you already have a relationship.

Personal Loan Rates by Credit Score (Approximate)

Rates are approximate and vary by lender, loan amount, and term. Use our personal loan calculator to see how your rate affects total cost.

Step 4 Compare APR, Not Just the Monthly Payment

The APR (Annual Percentage Rate) includes both the interest rate and any origination fees, giving you the true cost of borrowing. A loan with a lower interest rate but a 5% origination fee may cost more overall than one with a slightly higher rate and no fee.

Also watch for prepayment penalties -- some lenders charge a fee if you pay off the loan early. Avoid these if possible, since paying extra toward principal is one of the best ways to reduce total interest paid.

Step 5 Gather Documents and Apply

Once you have chosen a lender, the formal application triggers a hard credit pull. Have these documents ready:

• Government-issued photo ID
• Social Security number
• Proof of income -- recent pay stubs, W-2s, or tax returns if self-employed
• Proof of address -- utility bill or bank statement
• Employment information
• Bank account details for fund deposit

Online lenders typically approve and fund within 13 business days. Banks and credit unions may take 37 days.

When a Cosigner Makes Sense

If your credit score is below 640 or your income is limited, adding a cosigner with stronger credit can help you qualify or get a lower rate. The cosigner agrees to be equally responsible for the debt -- so this should only be someone who fully understands the commitment and trusts your ability to repay.

Common Mistakes to Avoid

• Applying to multiple lenders with hard pulls use prequalification (soft pull) first to compare offers without credit score impact
• Choosing the longest term to lower payments a longer term means more total interest paid; use our calculator to see the difference
• Ignoring origination fees a 5% fee on a $10,000 loan costs $500 upfront; factor it into your APR comparison
• Borrowing more than you need you pay interest on the full loan amount, so borrow only what is necessary
• Missing the first payment late payments on a new loan immediately damage the credit score you used to qualify