Obtaining a personal loan is effortless. To take it, you must follow a few steps, like checking your credit score, deciding how much money you want to borrow, and then calculating your estimated monthly payment through a personal loan calculator. If you like, you can also prequalify with different lenders to get good loan terms. Then you can also check the loan terms, choose a good lender, review the loan, and accept the loan. By following this process, you can easily be approved for a good personal loan.
In this blog, you will learn how to get a personal loan through the entire process, from preparing documents to picking the best lender and checking your credit score. You can take advantage of this information to make better financial decisions.
Steps for Securing a Personal Loan
Step 1: Check your credit score.
You need to have a credit score, which is a three-digit number, when trying to qualify for a personal loan. You can obtain a loan fast and at a low interest rate if your credit score is high. With a low credit score, it might be difficult to get a loan, and the interest rate might be very high. You can use your bank’s app or any credit score checker website to get your credit score for free.
Tips to improve your score:
- Make payments on time.
- Keep your credit card balance low.
- Avoid unnecessary credit checks.
- A high score indicates greater loan offers and negotiation strength.
| Credit Score Range | Credit Category |
| 720 and above | Excellent credit profile |
| 690–719 | Good credit standing |
| 630–689 | Average or fair credit |
| 300–629 | Poor credit rating |
Step 2: Calculate the amount you need to borrow.
It’s common to take out a loan without knowing all your financial needs. Many people take more loans than they need, which results in high interest, stress, or depression.
By carefully analyzing and calculating all of your costs, including those associated with business, education, and healthcare, you can avoid this. To make payments smoother and avoid unnecessary debt, only take out as much credit as is necessary.
Step 3: Calculate an estimated monthly payment.
You can better manage your budget if you know how much you will have to pay back each month. Many financial websites offer a free personal loan calculator that you can use for this. To obtain your planned monthly EMI, just input the loan amount, interest rate, and loan duration.
Example: Your monthly payment would be about $322 if you approved a $10,000 loan with a three-year term and 10% APR.
You will be able to make decisions based on your income and free yourself from financial stress as a result. Don’t forget your bills, insurance, and rent.
Step 4: Get prequalified with different lenders.
Prequalification is a smart step before taking out a loan. The lender shows this by looking at your soft credit, which has no negative impact on your credit score. This provides an approximate calculation of the interest rate, EMI, and loan amount.
Prequalify with different lenders and compare their offers. Choose reputable banks, credit unions, or trusted online lenders—this will help you select the best personal loan option for yourself that is perfect for your financial needs.
Read: What is a Personal Loan? A Complete Guide for Beginners
Step 5: Check all loan terms.
Don’t take out a loan just because the interest rate is low. While APR is important, you should also consider loan duration, fees, late charges, and prepayment penalties. Sometimes, there are hidden charges in the name of low interest, which make the loan expensive.
A fixed-rate loan has a fixed EMI, but a variable-rate loan can have a higher interest rate. Hence, it is very important to read the loan terms and fine print carefully so that you do not face any difficulty in the future.
Step 6: Choose a lender and submit your application.
Choose the loan that best suits your financial needs after comparing all of your available options. It’s the best time to submit a loan application. During the application, you have to provide your personal details, income proof, employment verification, ID documents, and sometimes a bank statement. Make sure all the information is accurate; if not, the loan could be rejected or delayed.
In today’s digital era, many lenders also provide personal loans online, which is very easy to apply for; this process takes only 10-15 minutes. After applying, the lender checks your eligibility. Approval can be obtained within a few minutes, or it can take a maximum of 1-2 days; it depends on the lenders.
Step 7: Review the offer and accept the loan.
Your accepted loan will come with a submitted loan agreement including all the terms and conditions. Take your time and read everything carefully. Make sure to check the following:
- Interest rate
- Monthly payment amount
- Repayment period
- Any hidden fees or charges
This is your final chance to back out if something feels incorrect. If you’re unsure, don’t be scared to leave. However, you can sign the contract in person or online if everything appears to be in order.
The loan amount is typically sent into your bank account 24 to 72 hours after you sign. To avoid future payment misses, set up automatic payments or reminders. It will assist you in staying on course and avoiding late fees and credit score damage.
Personal Loan pros and cons
| Pros | Cons |
| No Collateral Needed | High Interest for Poor Credit |
| Flexible Usage | Fees (origination, late, or prepayment penalties) |
| Predictable Payments | Without a repayment plan, there is a risk of getting stuck in debt. |
| Boosts the Credit Mix | Short Repayment Periods Can Increase Monthly Burden |
Why and When Should You Think About Getting a Personal Loan?
Taking a personal loan is a smart choice only when you have a valid and specific financial need that your savings can’t cover. For example, it’s useful when you need to pay off high-interest credit card debt or consolidate multiple loans into one.
A personal loan is adaptable; you can use it for anything you need. Though its interest rate is usually higher than other loans, it comes with the benefit of longer repayment terms and fixed monthly payments, which makes it manageable.
But avoid using personal loans for lifestyle expenses like vacations or luxury items. That’s not a wise financial move. Only take a personal loan if it improves your long-term financial stability and you’re confident that you can repay it on time with interest.
What Are the Requirements to submit a Personal Loan Application?
While eligibility requirements could be different greatly amongst lenders, the majority of personal loan providers have a few standard needs:
- Age: Candidates have to be at least 18 years old (21 in some countries)..
- Income: Proof of regular income, such as a salary slip, ITR, or bank statement, must be provided.
- Credit Score: A score of 580 or more is typically considered good.
- Residency Status: You must be a citizen or an official resident of your nation.
- Employment: Many lenders also ask for stable job experience (6 months or more).
Fulfilling these basic requirements increases the chances of approval and also increases the chances of getting better loan offers.
Top 6 Best Personal Loan Lenders
Choosing the right personal loan lender can make a big difference in your financial journey. Whether consolidating debt or covering emergency expenses, here are some of the best online personal loan lenders.
1. LightStream
- Overview: Backed by Trust Bank, LightStream offers some of the lowest interest rates for borrowers with good to excellent credit.
- Loan Range: $5,000–$100,000
- APR Range: Starts from 6.49% (with autopay)
- Website: lightstream.com
2. SoFi
- Overview: A top choice for professionals and recent grads, SoFi offers loans without fees and added perks.
- Loan Range: $5,000–$100,000
- APR Range: Begins at 8.99%
- Website: sofi.com
3. Upgrade
- Overview: Great for those with average credit who need fast access to funds.
- Loan Range: $1,000–$50,000
- APR Range: From 7.99%
- Website: upgrade.com
4. LendingClub
- Overview: Known for peer-to-peer lending, LendingClub helps match borrowers with investors.
- Loan Range: $1,000–$40,000
- APR Range: Starting from 7.90%
- Website: lendingclub.com
5. Discover Personal Loans
- Overview: A trusted name in banking, Discover offers straightforward personal loans with a satisfaction guarantee.
- Loan Range: $2,500–$35,000
- APR Range: From 6.99%
- Website: discover.com
6. Upstart
- Overview: AI-based approval makes it perfect for people with little or no credit history.
- Loan Range: $1,000–$50,000
- APR Range: Starts at 6.70%
- Website: upstart.com
Conclusion
A personal loan can significantly help during your tough times, but it is essential to take it responsibly. Before applying for a loan, carefully understand your financial situation, compare different lenders, and ensure you can easily pay the loan’s monthly payments. A loan can give you relief during your tough times, but if not managed properly, it can also become a reason for financial stress, so develop the best strategy and then work through the process. Do tell me by commenting on how you liked this blog. You will have gained much knowledge, and some of your doubts will also be cleared.