There are all sorts of reasons you might be considering taking out a personal loan. Maybe you’re trying to consolidate miscellaneous debts into a single monthly payment, or pay off high-interest credit cards. It could be that you’re finally getting around to that bathroom or kitchen remodel at home and need some cash up front for supplies or additional labor.
Maybe it’s that RV you’ve had your eye on, or that trip to Europe, or that wedding you worried might never happen! Sometimes it’s less pleasant – medical bills, funeral expenses, or a major move you didn’t anticipate. Having said that, when you apply there will be personal loan lender requirements. Keep reading to learn what you will need to get a loan.
Whatever the need, personal installment loans are a popular and straightforward way to access the resources you need. They don’t generally require collateral, and you can often get your personal loan online, saving yourself both time and headache. Before you start, however, you might want to start gathering a few things together to help smooth the process. To do that, it helps to be aware of the most common personal loan lender requirements.
What Documents Do You Need When Applying For a Personal Loan?
Most lenders are going to want the same basic information to get things started, although specific personal loan lender requirements may vary from lender to lender or with the terms of the loan. Don’t panic if they ask for something you don’t have in front of you or aren’t sure how to get. Just be as prepared as you can and provide as much information as you have. If they simply must have something specific that you didn’t anticipate, you and they will figure something out. Remember, they want you to get the loan and become their customer – they’re on your side!
The first thing a lender wants to confirm is that you’re who you say you are
Proof of identity can be one of the easiest things to forget about because we don’t really think about it very much. Most of us know who we are, at least in terms of our names, date-of-birth, and such; we forget how important it is to be able to establish those things with others.
The most obvious forms of identification are things like…
- Driver’s License
- Social Security Card.
- Military ID
- Official State ID
The key is that it something official, with your full name and usually a photo of your wonderfully trustworthy face. They’ll also want your Social Security Number, even if they don’t require the actual card. Keep in mind that lenders aren’t just looking to verify your name, although that’s pretty important. They want to confirm that you’re at least 18 years old and either a U.S. citizen or a legal resident. These are all normal personal loan lender requirements, but fortunately none of them are difficult to prepare for.
The next step is usually checking your credit score
You don’t have to provide this; they’ll be able to pull it up pretty easily. There’s no reason you shouldn’t know your credit score going in, however. It’s easy enough to find out and knowing will help you be better prepared. The better your score, the easier it will be to get the best interest rate or other favorable terms, of course, but a low credit score doesn’t automatically mean you won’t be able to find a personal loan you’re happy with. Your credit score matters, but it’s only one of several factors used to determine the specifics of your personal loan. Remember that most lenders want to loan you money – that’s how they stay in business.
What Do Personal Loan Lenders Look At On Your Credit Report?
The most obvious thing lenders are looking for on your credit report is whether or not you have a good history of making payments on your credit cards, car payments, previous personal loans, etc. Be prepared to address any periods of inconsistency. Be honest, and be ready to offer legitimate reasons why you don’t anticipate similar difficulties this time. It can take years for your credit score to recover after a rough patch, but every on-time payment you make, big or small, adds to your record of reliability now. This can be one of the personal loan lender requirements borrowers find most intimidating, but remember, it’s not personal. The lender just wants to better understand how things work in your world so they know what to expect.
Then They Look at What Type of Debt You’ve Incurred In the Past
Car loans and mortgages are nearly universal in this day and age. Nearly everyone has experience with this sort of debt; it’s normal and responsible, even if there’ve been a few late payments here and there. Credit cards are slightly less essential, but still an important part of modern life for most of us. If you’ve managed a reasonable number of cards without severe difficulty over the years, that speaks to your reliability with the loan you’re currently seeking. Multiple large loans for vacations or non-essential big-ticket items might raise an eyebrow, especially if your record of repayment has been inconsistent. Borrowing money actually helps build a good credit rating, but only if you pay attention and make timely payments, even on the little things.
What’s your current outstanding debt? This one will be compared to your current income. In short, lenders want to make sure the math makes sense – that you can reasonably repay this new loan along with your existing obligations at your current level of income. If there’s any reason those numbers won’t look right at first glance, be prepared to justify extending yourself further, and have documentation to back it up. Some lenders have very specific personal loan lender requirements, while others allow their agents a degree of flexibility to use their best judgment, so keep things positive and professional. It can’t hurt, and it might improve your odds.
They Will Also Look at Your Lines of Credit
Have you opened up new lines of credit recently, or have there been multiple inquiries to your credit report in the past few weeks or months? If so, presumably you have a good reason for all this activity right before you’re seeking an unsecured personal loan. If you don’t, this might not be the best timing. Lenders want to work with you, but they’re interested in genuine clients with every intention of repaying their loans. Too much activity creates the impression you might not be that wonderful, sincere person you and I both know you are.
Do Personal Loans Require Proof of Income?
Naturally, income verification is pretty-much a non-negotiable when it comes to personal loan lender requirements. Lenders must determine what sort of monthly payments you can reasonably be expected to make. How they do this will vary widely, but you should be prepared to tell them as accurately as possible where you work and what you do, how much you make, and how long you’ve been there. They’ll also want to have a pretty good idea of how much money you currently owe on your house, car, credit cards, etc.
You may find yourself simply entering numbers on a form, or the lender may ask for proof for some or all of the items included. Common paperwork you should have with you might include:
- Recent Bank Statements
- Pay Stubs
- Tax Returns or W-2s
- Mortgage Paperwork or Verification of your House Payment or Monthly Rent
- Recent Statements for Car Loans or other Installment Plans
- Student Loan Information
If you’ve changed jobs recently or moved more than once in the past few years, be prepared to address this upfront. When my wife and I moved to another state a few years ago, I learned very quickly to volunteer relevant information when applying for jobs or setting up finances. Why yes, we moved in only recently – we’re still unpacking boxes! It’s been an experience, though, especially since we were in our previous home for over fifteen years and we’re not used to this! Here are some recent places I’ve worked. I was at my previous job for nearly a decade and I’m determined to find something equally permanent here.
Don’t Exaggerate or Distort Just Because There may be Uncomfortable Topics Along the Way
Just think through issues that might come up and how you’ll address them if they do. You might also want to use an online personal loan calculator to get an idea going in of what sort of monthly payments make sense for you. You may not be able to control everything wrapped up in personal loan lender requirements, but you can arrive prepared and informed.
What Other Information Do You Need To Get A Personal Loan?
Personal loan lender requirements will almost certainly include proof of where you live – and probably where you lived before that. Obviously it’s better if you haven’t been bouncing from place to place every few months, but whatever your reality, sit down and gather dates and addresses ahead of time. I confess that I’ve embarrassed myself a number of times trying to remember what year we moved in together or the name of the apartment complex we lived in when my kids were born. I’m sure you’ll do much better than I did. Please.
Paperwork to help verify your address(es) may include:
- Utility Bills
- Lease Agreements
- Voter Registration Cards or Forms
- Insurance Statements
- Change of Address Confirmation from USPS
What Do I Need To Know Before I Apply For A Personal Loan?
So far, we’ve focused primarily on personal loan lender requirements – the types of information you should be ready to share with potential lenders. They’re not the only ones we want to be happy, however; you’re part of this equation as well. What are some things you should be thinking about before getting a personal loan to ensure you’re satisfied before you commit?
You’ve no doubt anticipated paying interest on the amount you borrow, but most personal loans involve miscellaneous fees or charges as well. These don’t have to be a problem if you know to look for them ahead of time.
Late fees are the most obvious example of additional charges. Most credit cards utilize these, and maybe you’ve encountered them with other lines of credit as well. Keep in mind that in addition to whatever additional interest you may incur by missing a payment, late fees can add up quickly and impact your future credit rating as well.
Some loans charge a penalty for paying them off too early (thus limiting the amount of interest they’re able to earn from having loaned you the money, to begin with). Others are happy to have you pay additional amounts on the principal each month or even to pay the loan in full well-ahead of what was scheduled. Ask about this before finalizing any arrangements. As with any contract of any kind, read the terms!
Finally, most personal installment loans require some sort of origination fee to cover the paperwork and manpower involved in getting the loan set up and started. They’re not usually excessive, but you should be aware of them before finalizing them. If you’re asked to pay a fee upfront which seems unreasonable, or there are percentages or other terms woven into the small print which don’t make sense to you, ask for clarification. Legitimate lenders will have clear, easily-communicated personal loan lender requirements; they want you to understand both the benefits and responsibilities of what you’re getting into.
If you’re not happy with the process, trust your gut – that feeling could be a red flag. Legitimate lenders want to cover their costs and make a reasonable profit, but they benefit when you end up happy with the entire experience and successfully pay back the loan over time. Predatory lenders seek to exploit people in need and trap them into impossible financial situations by overpromising and under-communicating. They’re not looking for long-term relationships; they’re looking for an easy score.
The best way to avoid scam artists or questionable financing is to begin your search with known, reliable sources.
Where Can I Find The Best Personal Loans?
If you have a good relationship with your local bank already, that’s a great place to start. As unsecured loans, personal loans generally assume you have pretty good credit and a track record with the specific institution from which you’re borrowing.
If you’re a member of a local credit union, you may find it easier to get a loan on good terms even without spotless credit. Why is that? It all comes down to the differences between banks and credit unions. Jim Cramer’s TheStreet.com explains it this way:
The bottom line is that banks are for-profit institutions, while credit unions are non-profit. Credit unions typically brag better customer service and lower fees, but have higher interest rates. On the contrary, banks generally have lower interest rates and higher fees. Banks, on the other hand, often have higher fees but more convenience regarding location, technological efficiency, mobile access, and rewards programs.
Another option with which far too many people aren’t familiar is to consult a marketplace lender. What is that, exactly? Marketplace lending is a service-driven loan industry, usually based online, which competes for your business. There are a number of reliable online marketplace lenders who can get you your money relatively quickly and who are able to be flexible with your credit history. Unfortunately, just like you’ve probably noticed that sketchy “payday loans” place a few blocks down from your local credit union, there are some untrustworthy players on the web as well.
That brings us to a rather important element of this discussion – how, exactly, do I find these legit lenders? Should I just Google “get personal loans online” and hope for the best?
Here we are!
That’s where we come in. We help you loan shop by flipping the traditional dynamic associated with getting a personal loan. There’s no reason you should feel overwhelmed and alone, confused by the system, and desperate for options. What you really are is a client, who has the power to choose from numerous marketplace lenders who compete for your business by putting together their best solutions and hoping you’ll consider giving them your business.
What are we selling you? Nothing – nothing at all. Loanry gathers some basic information and offers a few tools to help better determine your needs, then connects you with a participating lender to secure a solution both of you decide is best. We don’t charge you any fees or take any payments from you. Period. Once you’ve found a lender that meets your needs, the rest is between you and them.
How To Qualify For A Personal Loan
If you have some flexibility with when you apply for a personal loan, you may consider doing some things ahead of time to improve your chances of qualifying for a personal loan and getting the best terms possible from the lender you choose. I know, I know – some of you are thinking that if you had that kind of time and money you wouldn’t be online right now scouting information on personal loan options! Whatever your circumstances at the moment, take a slow, deep breath and just stay with me for a few more moments while we look at some simple things almost anyone can do to improve their credit situation. I promise, it’s not as bad as it might sound.
First, look up your credit score. We talked about these above while covering the variety of personal loan lender requirements, remember? You probably know there are three primary credit reporting agencies which are used by just about everyone – Equifax, Experian, and Transunion. You may not know that while they have much in common, they each compute your credit score slightly differently. In general, though, your score falls into one of five categories:
- Anything between 800 – 850 is considered “excellent.”
- Scores from 740 – 799 are “very good.”
- A score between 670 – 739 is still “good.”
- 580 – 669 counts as “fair.”
- And anything below 579 means, well… that things haven’t always gone as well as you’d have liked.
Poor Credit By The Numbers
If you discover you’re in that lowest category, you’re not alone. Nearly 1 in 5 Americans had a “poor” credit score in 2018 (although that percentage has gradually been falling as more and more people learn how to take better control of their credit ratings).
Whatever your credit score, it improves as you make payments on time. Big payments, little payments, car payments, credit card payments – the key is consistency. If you have a year before you need a personal loan, start paying attention to those due dates now. But even a few months of on-time payments help to start nudging those numbers in the right direction.
Should I get a co-signer?
Another option to consider is getting a co-signer. A co-signer is a friend or family member with a more established credit record who agrees to “back you up” on your personal loan. They must meet the same personal loan lender requirements, and they’re agreeing to make the payments if you don’t, so this is not something to take lightly. Money isn’t everything, but it does have the power to strain friendships or create family tension. Make sure both of you are clear on the specifics and comfortable with the arrangement before pursuing this option.
That said, a co-signer can help you not only get the loan, but may help you get a better interest rate. As you make your payments, your credit rating goes up just as if you were the only person on the loan. If you don’t, however, it will hurt your co-signer’s credit rating, which may not go over very well. The solution? Make your payments!
There are simply no quick and easy answers to building or rebuilding good credit, but it’s quite doable no matter where you are now. Even negative events like bankruptcy or accounts marked “non-collectible” are eventually will fall off your report. What’s left is your more recent behavior. So don’t get discouraged – get started!
If I Apply For A Personal Loan, Do I Have To Accept It?
No. Until the lender has agreed and you’ve signed, there’s no loan.
It’s possible you’ll still have to pay personal loan fees, depending on how far the process has gone. As with anything related to your loan, read the terms carefully as you go.
You can get more information and begin the search for the right marketplace lender for you right now if you’re ready. Or you can Contact Us for more information. Whatever your circumstances, you got this – and we can help.
Blaine Koehn is a former small business manager, long-time educator, and seasoned consultant. He’s worked in both the public and private sectors while riding the ups-and-downs of self-employment and independent contracting for nearly two decades. His self-published resources have been utilized by thousands of educators as he’s shared his experiences and ideas in workshops across the Midwest. Blaine writes about money management and decision-making for those new to the world of finance or anyone simply sorting through their fiscal options in complicated times.