Takeaways: All lenders have different qualification requirements and may ask for different information. Lenders may also require you to apply in-person, while others let you complete the entire application online.
Next steps: Determine the application process for the lender you have chosen. Once you are ready to apply, gather all of the information you will need for the application and apply as directed.
7. Provide necessary documentation
Every lender is different when it comes to what you need to apply. Once you submit your application, your lender will likely ask you to provide some additional documentation. For example, you might need to upload or fax a copy of your latest pay stub, a copy of your driver’s license or proof of residence.
The lender will let you know if it needs any documentation from you and how to get it to the right person. The faster you provide the information, the sooner you’ll get a decision.
Next steps: Gather pay stubs, proof of residence, driver’s license information and W-2s in advance to speed up the application process. Submit all requested documentation quickly to your lender to get your decision as soon as possible.
After the lender notifies you that you’ve been approved, you’ll need to finalize the loan documents and accept the terms. Once you do this, you’ll typically get the loan funds within a week – but some online lenders get it to you within one or two business days.
When you are approved, start keeping track of when your payments are due, and consider setting up automatic payments from your checking account. Some lenders even offer interest rate discounts if you set your account to make autopayments.
Consider paying extra each month . While personal loans can be cheaper than credit cards , you’ll still save money on interest by paying the loan off early. Adding even a small amount to your monthly payments can help you do so.
Takeaways: You could receive the funds as early as one to two business days after getting approved and accepting the loan terms. Once you’re approved, start considering how you’ll pay down your balance.
Next steps: Create a plan to make your monthly payments and pay your loan off. Consider automatic payments and think about paying extra each month to save on interest.
Factors that will affect your interest rate
Personal loan qualification requirements vary based on the lender, but there are a few criteria that many lenders look at to determine your interest rate offer.
- Your credit score: Good credit can make it easier to qualify for a personal loan at a lower interest rate. Lenders will review your score and your credit history for adverse marks, like late payments or delinquent and defaulted accounts.
- Debt-to-income (DTI) ratio: Your DTI ratio is the amount of your monthly debt divided by your monthly gross income. Generally, a low DTI ratio is a signal to lenders that you can manage monthly payments on a new personal loan .
- Loan term: Generally, loans with shorter repayment terms offer lower interest rates. A longer repayment term typically means a higher interest rate.
- Co-signer: If you don’t meet the lender’s qualification requirements, having a trusted family member or friend in good financial health be your co-signer can increase your chances of approval – potentially at a better interest rate.
If you have a low credit score and a high DTI ratio and don’t have a willing co-signer with good credit and stable income, you won’t be eligible for the lowest personal loan rates. However, a strong credit score and a low DTI ratio will attract the most competitive rates.