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When you apply for a personal loan, the lender will approve or deny your application based on whether you meet its eligibility criteria. Personal loan requirements are similar across lenders, though some may have higher approval standards.
For example, most lenders review your credit score on a personal loan application, but some require good or excellent credit (a score from the mid 600s and higher), while others lend to borrowers with fair or bad credit (a score from 300 to the low 600s).
Here are common personal loan requirements and tips on how to improve your chances of getting approved.
Key considerations for personal loan approval
Credit score
Your credit score is a key factor lenders consider when evaluating you for a personal loan. A credit score helps lenders understand your reliability as a borrower.
Many lenders have hard minimum credit score requirements, often in the 600s or above. Borrowers with good or excellent credit scores typically get the best annual percentage rates and terms.
» GET STARTED: Check your credit score for free
Credit history
Credit history is also a factor on most personal loan applications. Strong applicants have solid histories of on-time debt payments, plus a mix of different credit types. Many lenders require at least two or three years of credit history.
You can view your credit reports, which show payment history, for free with NerdWallet or at AnnualCreditReport.com.
Income
Lenders want to see that you have steady income or cash flow that can support monthly loan payments. Some lenders have specific minimum monthly or annual income requirements.
For example, Avant requires borrowers to have a monthly income of at least $1,200, while you'll need an annual income of at least $25,000 for a Discover personal loan.
Your paycheck isn’t the only acceptable income source. Many lenders consider income from sources like alimony or Social Security payments, so it’s important to list all your income sources on a loan application.
Debt-to-income ratio
Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward debt payments. Lenders use DTI to evaluate your ability to afford new loan payments. Lenders typically prefer a DTI around 36% or less, but they may approve loan applicants with higher DTIs.
Nerdy Perspective
Not all lenders clearly disclose borrower requirements. You may have to search the fine print or FAQs on a lender’s website or contact lenders with specific questions. A good first step is to read NerdWallet’s reviews of the best personal loan lenders. We’ve surveyed over 30 lenders asking detailed questions about what a borrower needs to qualify, including credit score, credit history, income and DTI requirements.
Documents required for a personal loan
When you apply for a personal loan, you may be asked to submit documents to verify information like your income and identity. To speed up the process, gather necessary documents before you apply.
Required documents can include:
- Proof of identity, like a government-issued ID.
- Proof of address, like a utility bill or mortgage statement.
- Proof of income and employment status, like a pay stub, tax return or W-2.
- Proof of additional income such as alimony or child support.
- Social Security or Individual Taxpayer Identification number.
Other criteria for personal loan eligibility
To get a personal loan, lenders may also ask that you:
- Are at least 18 years old.
- Have a verifiable phone number or email address.
- Live in a state where the lender operates.
- Have U.S. citizenship or permanent residency.
If you’re getting a personal loan from a credit union, you’re required to be a member. Some banks also require borrowers to be an existing customer before getting a loan.
Questions to ask before applying for a personal loan
Here are a few questions to ask yourself when deciding whether to get a personal loan, even if you meet the requirements.
1. Is a personal loan the right financing option for me?
Personal loans can be used for a variety of reasons, for example, to consolidate debt or finance a medical procedure. However, you may have lower-cost options, such as a 0% balance transfer credit card or family loan. Compare other ways to borrow money before choosing a personal loan.
2. Have I pre-qualified to compare loan offers?
Many personal loan lenders let you pre-qualify to check your eligibility and see your estimated rate and terms before formally applying for a loan. Pre-qualifying involves a soft credit check, which doesn’t impact your credit score. This makes it easy to compare loan offers from multiple lenders.
3. Can I afford the monthly payments?
Personal loan payments should fit comfortably in your budget. If you pre-qualify, the lender will likely share your estimated monthly payment amount. You could also use a personal loan calculator to estimate your monthly payment. Once you understand what you can expect to pay on your loan each month, check your budget to see if that’s something you can afford.
4. Do I understand the fees?
Some lenders charge origination fees, which can range from 1% to 10% of the loan amount. Other common charges are late fees and nonsufficient funds fees. Before applying, understand how the potential fees may affect the loan and your budget.
» MORE: Pros and cons of personal loans
Tips to qualify for a personal loan with bad credit
There are a few things that can strengthen your chances of getting approved for a personal loan, even if you don't have a perfect credit score.
- Add a co-signer or co-borrower. Adding a co-signer or co-borrower with strong credit and income can help you qualify for a loan or get a lower interest rate. A co-signer simply vouches for your ability to repay a loan, while a co-borrower has equal access to the funds. Keep in mind that both co-signers and co-borrowers are responsible for loan payments if you stop making them.
- Add collateral. A secured personal loan is backed by an asset like a car or savings account. These loans can have lower rates or higher amounts than unsecured loans, but the lender can take the asset if you fail to make payments.
- Ask for less money. A large loan can feel risky to a lender, so try to keep your loan amount low for a better chance of approval.
- Take time to build credit. If you have bad credit or a thin credit history, consider whether holding off on the application to work on your credit is an option. Getting a secured credit card or becoming an authorized user on someone else's credit card are two ways to build credit. Another way to build your score is to request higher limits on your credit cards, which reduces your credit utilization, or the percentage of your available credit used.
- Lower your debt-to-income ratio. You can lower your DTI by paying down existing debt or increasing your income.
How to apply for a personal loan
- Review your credit report. This lets you see how your credit may look to a lender and gives you a chance to resolve any errors that might be affecting your score.
- Pre-qualify with multiple lenders. When you pre-qualify, lenders will show estimated APRs, terms and monthly payment amounts with no impact to your credit score. Pre-qualify with multiple lenders to compare offers and find the best option.
- Apply for a loan. The formal application process requires submitting an application and providing documents to verify your identity and income. You can expect the lender to run a hard credit check at this point, which may drop your credit score a few points.
- Sign loan agreement and get funded. If approved, you'll typically receive the funds within a few days. The first payment date is generally 30 days after the loan has been issued.
» MORE: How to get a personal loan
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What happens if I’m denied?
Figure out why. If your loan application is denied, the first step you should take is to understand why. Lenders are required under the Equal Credit Opportunity Act to provide the reason for denying a loan application. This information can help you identify what you need to do to improve your chances of future loan approval.
Work on your credit score. You may need to take steps to strengthen your credit score by paying down debt, resolving errors on your credit report or building more credit history.
Keep in mind that this process could take a few months or more than a year. It can be difficult to qualify for a loan if you reapply too soon and haven’t built up your credit after being denied.
Look into financing alternatives. If you can’t wait that long, consider alternatives to a personal loan.
If you’re trying to borrow money for a large purchase, many merchants offer buy now, pay later plans that let you break up an expense across four biweekly payments, often without interest.
If you need quick cash in between paychecks, various cash advance apps let you borrow a few hundred dollars from your upcoming check, usually with no interest.
Alternatively, try to build your savings or find a way to earn extra income. Those moves could potentially help you avoid borrowing or at least borrow a smaller amount.
Next steps
Pre-qualify for a personal loan with NerdWallet’s trusted lending partners. Just answer a few questions about yourself and your desired loan, with no effect on your credit score. You could get multiple loan offers within minutes. Funding could be as soon as the next business day.
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