A personal loan lets you borrow a specific amount of money from a lender, typically to pay for something you need now but might not be able to afford with current income. You then pay back the borrowed funds over a defined period of time in monthly payments that include both a portion of your principal and interest charges. With on-time payments, you can potentially improve your credit score and gain access to better loan rates in the future.
Whether you need a personal loan for a vacation, wedding expenses or a new appliance, there are lenders that offer unsecured and secured loans with flexible terms. The best personal loans for you depend on your financial profile, including your credit history and debt-to-income ratio. Using a personal loan calculator like the one on WalletHub can help you determine which type of loan might work best for your needs and budget.
What are the requirements to get a personal loan?
To qualify for a personal loan, you must be at least 18 years old and a legal resident of the U.S. You must also have a valid Social Security number or Individual Taxpayer Identification Number (ITIN) and sufficient income to make your monthly loan payments. Individual lenders may have additional requirements, such as minimum credit scores and minimum income levels. Before applying, check out the loan requirements for a specific lender to avoid any surprises.
You can find personal loans at banks, credit unions, consumer finance companies, online lenders and peer-to-peer lenders. Some of these lenders may specialize in certain types of personal loans, so it’s important to shop around and compare multiple offers to ensure you’re getting the best possible deal. When evaluating loan offers, look at the annual percentage rate (APR), which factors in all fees and charges to give you an accurate picture of the total cost of the loan.
The personal loan application process varies by lender, but you can expect to be asked to provide your name, address, date of birth and employment information. The lender will also usually run a hard credit inquiry, which can have a small and temporary negative impact on your credit score. After submitting your application, the lender will review it and notify you of its decision.
You can apply for a personal loan with bad credit, though you’ll likely have to pay higher interest rates than those charged to borrowers with good credit. The best personal loan lenders typically require a credit score of at least 690 and a debt-to-income ratio of less than 30%. In some cases, you can boost your chances of approval by putting up collateral such as an auto title or cash in a bank account, or by adding a co-signer with a strong credit profile who is on the hook for any late payments. If you’re approved for a personal loan, the lender will send you the funds through a wire transfer or paper check.