Personal Loan Eligibility Criteria Lenders Look For

Thinking about a personal loan? For whatever reason it might be—consolidating credit cards, making a big purchase, working on home renovations, or paying down debt faster—it’s important to find a loan that not only meets your needs, but one you have a good chance of qualifying for. Here’s what you need to know about personal loan eligibility and personal loan requirements before applying for a personal loan.

In This Article

What Lenders Look for in Determining Personal Loan Eligibility

From your credit score to your assets, key pieces of your finances will play a big factor in whether you’re approved for a loan, how much you qualify for, and what rate of interests and terms you’ll receive. Here’s what a lender looks at when they review your personal loan eligibility.

Credit Score

Do you show a history of paying your debt on time? Though credit score requirements vary from lender to lender, a good credit score is one of the leading factors in determining eligibility. Most lenders prefer extending credit to borrowers with good or excellent credit scores—670 and up. Below that range, loans can often still be approved, but interest rates may be higher.

Keep in mind a high credit score doesn’t automatically mean you’ll get a low interest rate, but it does help.

Payment History

While payment history is the biggest factor in determining your credit score, it is also something lenders may look at in more detail when reviewing your loan application. From the lender’s perspective, how well you paid your debts in the past is a good indicator of how you will make loan repayments.

Before you begin the application process for a loan make sure all of your debts are current. If you have any past due balances, address those immediately. It won’t erase the past — any missed payments remain on your credit report for seven years — but it can help show lenders you’re working on improving your financial situation. Once you’ve got all your accounts current, set up automatic bill pay or automatic payment reminders so you never miss a deadline. Over time, your payment history (and credit score) could improve.1

Income

Income is a crucial factor in eligibility because it gives lenders confidence you have the means to pay back the new loan. Most lenders set a minimum income limit for loan approvals, depending on the asking amount. If you have full-time or part-time income, plan on sharing your last two or more paystubs. If you’re a gig worker or freelancer without a steady paycheck, many lenders will still be willing to work with you. However, you may need to supply additional proof of your income or average out your pay into a month-by-month basis. To save time, get your tax returns, 1099s, and balance sheets together. All of these documents can help prove irregular income.

Every lender is different, so don’t get discouraged if you’re denied based on income by one company. Shop around to find one that works for you.

Current Debt

Lenders look at your current debt as it compares to your income, also known as your debt-to-income-ratio. Often, lenders look for a DTI under 40%—if you’re above that mark they may see you as a higher-risk borrower.

To calculate your DTI, add up your monthly debts and divide that total by your gross monthly income. For example: If your monthly debt payments are $1,000 and your gross monthly income is $5,000, your debt-to-income ratio is 20%. Keep in mind, monthly payments like insurance, utilities, taxes, and recurring home expenses are generally not used to determine debt.

If your DTI is higher than 40%, you can bring the number down by paying off some (or all) of your debt. As you work to lower your DTI, postpone adding any large purchases to your credit cards, as that might cancel out your hard work.

Common FAQs About Eligibility for a Personal Loan

If you’ve just started exploring personal loans, you probably have a ton of questions. Here are some of the most common.

How old do you have to be to get a personal loan?

You have to be at least 18 years old to apply for a personal loan, though it’s important to keep in mind most lenders factor in age, job, and work experience when determining eligibility. If you’re applying for a personal loan before you turn 21, make sure to include a job history.

Are personal loans hard to get?

Getting a personal loan is simple as long as you meet the lender’s requirements for eligibility and are generally flexible with personal loan interest rates. However, you want to make sure you’re getting the best rates and terms on your personal loan. Be sure to compare the APR’s offered against several lenders before you sign up. Some lenders, for example, charge application fees and prepayment penalties while others, like LendingClub, do not, which can affect your overall cost.

Do I need a high credit score to qualify for a personal loan?

Though it’s possible to get a personal loan with a lower credit score, a FICO score that is considered good (670–739) through excellent (800 and above) will give you the best chance for approval. High credit scores can also help you get a lower interest rate.

Will lenders look at my assets?

Most personal loans are unsecured, meaning you don’t have to use your assets—like your home, car, or savings account—as collateral. While your lender may ask about your available liquid assets, such as the funds in your checking and savings account, they generally won’t review all of them. If you opt for a secured personal loan, however, you will have to use your assets as collateral (most are backed by a savings account).

Where can I get a personal loan?

Several financial institutions offer personal loans. You can use your flagship bank or credit union or opt for a marketplace or online lender. Comparing rates from both online lenders and traditional banks can help you find the best offer for your needs.

What if my personal loan application is denied?

Each lender sets their own requirements for personal loan approvals, so it helps to compare. However, if you are struggling to qualify for a personal loan you may want to take a step back and see what improvements you can make. If you can, work on your personal finances for a few months—pay down debt or boost your credit score—and then apply again. Just because you were denied the first time, doesn’t mean you will be a second time.

6 Tips to Qualify for a Personal Loan

If you think a personal loan is right for you, start by assessing how much you need and come up with a repayment plan to pay it back. Once you’ve checked the criteria for different lenders, do these six things to help you qualify for the lowest rates and best terms.

1. Improve your debt-to-income ratio

Your debt-to-income ratio is a huge factor in determining your loan eligibility. By paying down some of your debt first to improve your ratio, you increase your chances of getting a loan and at a more favorable rate. Start by creating a weekly or monthly budget for expenses and come up with a plan to beat back some debt in advance of applying for a personal loan. If your time allows, a side gig could allow you to make extra payments and help you pay down your debt faster.

2. Precheck your eligibility

While credit inquiries aren’t a huge factor in your credit score—accounting for just 10% of your FICO score—applying for several loans or credit cards at once could signal to lenders that you’re headed for financial trouble. Instead, try checking your rate for a personal loan online with a few different lenders first. Checking your rate online is easy, won’t affect your credit score, and can help determine who is willing to offer you the best rates and loan terms.

3. Compare different lenders

Research is the key to securing a good loan with a favorable interest rate. Take the time to learn the difference between loan offers with different lenders to find the one best for you. In addition to checking with your local community bank, keep in mind that online lenders, online banks and lending marketplaces are the rise and might offer a more cost-effective solution for your needs, especially when you consider interest rates, APRs, and the added fees associated with some of the more traditional banking institutions. Each type of lender—whether that be a local flagship bank or online lending marketplace—will offer different rates, fees, and terms. Compare your options before making a decision.

4. Increase your credit score

If your credit score is lower than 630, focus on increasing it. Do this by making at least the minimum payment on all your bills on time and make sure your credit report is free of any errors that might be affecting your score. If you do find errors, file a dispute with the credit bureau immediately.

5. Don’t ask for more than you need

Keep in mind, you can only qualify for a personal loan you can comfortably afford. If your income isn’t high enough to easily repay the monthly payments, you may struggle to get your loan approved. Try lowering the total amount you are asking for. Once you’ve paid off or paid down your loan — or if you receive an income boost — you can always reapply for a second personal loan. In fact, many LendingClub members focused on debt consolidation are repeat borrowers.

5. Consider a joint personal loan

If you need a loan now and your credit history, score or income is not where it needs to be, consider a joint personal loan. With these loans, you and a co-borrower (typically a spouse, partner, or family member) will apply for and sign the loan together. You’ll both be responsible for payments and will both have access to the funds, which can be great if you’re using the loan for something you both need, like home repairs. Many LendingClub members also apply for a joint personal loan to help consolidate and pay down debt. By applying together, the lender will consider both you and your co-borrower's qualifications, which can help push you over the threshold for qualification or get you a larger loan amount than if you applied only on your own.

The Bottom Line

Understanding the factors that determine personal loan eligibility can help get you in the best situation for approval before you apply. This lets you research the companies that would work best for you without you needing to apply for too many loans, which can maximize your chances of a favorable rate and loan amount. By bringing borrowers and investors together, LendingClub has transformed the responsible way people can access credit. Applications take less than two minutes to apply, and borrowers can receive up to $40,000 in 48 hours, which has allowed millions of people take control of their debt and invest in their future in an ethical, responsible way.2

1Reducing debt and maintaining low credit balances may contribute to an improvement in your credit score, but results are not guaranteed. Individual results vary based on multiple factors, including but not limited to payment history and credit utilization.

2Between April 2021 and June 2021, personal loans were funded within 48 hours after loan approval, on average The time it takes for a loan to be funded is not guaranteed and individual results vary based on multiple factors, including but not limited to investor demand.

Personal Loans, Unsecured, Fixed Rate

1 Approval process may take longer if additional documents are requested. Funds are generally deposited electronically via ACH for delivery next business day if approved by 4:30 ET Monday–Friday. Depending on your bank, it may take up to three days for your funds to be available.

2Subject to Credit Approval. No origination or application fee.

Loan amounts range from $2,000 to $50,000. Repayment terms range from 36 - 60 months. interest rates range from 6.99% to 21.99%. The most credit worthy applicants may qualify for a lower rate while longer-term loans may have higher rates. The following example depicts the interest rates, monthly payments and total payments available for a $10,000 loan with a 48 month term: interest rate range of 6.99%-21.99%, 48 payments, of $239.42 -$315.00 and total Payments of $11,491.97 -$15,120.31. If approved, your loan amount, interest rates and monthly payment may differ from the example based on the length of the term selected, your current income, creditworthiness and other factors. FL residents: Doc Stamp Fee applies. Loan cannot be used for business or education expenses.

TD Fit Loans are available to residents of CT, NJ, DE, NY, Washington, D.C., NC, FL, PA, ME, RI, MD, SC, MA, VT, NH and VA.

What documentation do you need for a personal loan?

Before a lender can finalize your application, they may request that you provide personal documentation. Your lender will need to see important pieces of financial and personal information that determine if you prequalify for a loan.

Key takeaways To take out a personal loan, you’ll need to provide your lender with financial and personal information.

There are four sets of documents you’ll usually need to prove your identity, address, income, and monthly expenses. Applications also require your credit score and the purpose for the loan.

If you aren’t approved for a loan at first, you can try to apply with a cosigner or apply for a secured personal loan.

So which documents do you need to apply for a personal loan?

Here’s what we’ll cover:

Which documents do lenders ask for?

Typical personal loan documentation requirements Proof of your identity Proof of address Proof of income Recurring monthly expenses Your credit score Your purpose for the personal loan

What if I don’t get approved?

Apply for your personal loan from Oportun today

Which documents do lenders ask for?

Document requirements vary slightly with each personal loan lender. But most lenders ask for the same types of information unless they can obtain it in other ways. This information helps them assess whether you can afford to make payments on your personal loan.

For example, a lender must verify your personal information so they will want documents that prove your identity, address, income, and credit score. More on that below.

Gather your documents ahead of time

Before applying for a personal loan, it helps to have all the necessary documentation on hand. If you need a personal loan for an urgent expense, you probably want your money as soon as possible.

One way to speed up the process is to gather your documents before you apply. When you have these documents ready, the application process will be faster. Plus, many personal loan lenders will give you the money within a day of approving your application.

If you’re completing your application online, you can scan each document ahead of time. This way, you can attach digital files in a secured location with ease.

So which documents do you need?

Typical personal loan documentation requirements

Although each lender asks for slightly different documents and may be able to verify this information in other ways, it’s safe to assume you’ll need the following for your application:

1. Proof of your identity

First and foremost, you have to prove to lenders that you are who you say you are. Unfortunately, loan application fraud is more common than you think, which is why lenders need to verify your identity.

Your proof of identity can also show that you meet the basic requirements for personal loan eligibility, such as:

Being a United States citizen, a permanent resident, or a long-term U.S. visa holder (depending on lender requirements)

Being 18 years or older

Valid forms of ID

To prove that you meet these criteria, make sure you have at least one form of valid ID from this list:

Driver’s license

Passport

State ID

Military ID

Government-issued photo ID

Social Security number (SSN)

Individual taxpayer identification number (ITIN)

2. Proof of address

After verifying your identity, lenders want to verify where you live. From time to time, lenders will also need to send you information, such as bills and payment notices. If they don’t know where you live, they won’t feel comfortable lending you money. Plus, this is how lenders customize your personal loan to meet your state’s laws, if applicable.

You can use any of these documents to verify your home address:

Utility bill

Lease or rental agreement

Voter registration card

Proof of insurance for your home, rental, or car

3. Proof of income

Next, lenders need to verify your annual income. Lenders are more likely to approve borrowers who earn a steady income. This reassures them that you’ll be able to make your monthly personal loan payments on time. Many lenders have a minimum income requirement. If you fall below it, you won’t qualify for a personal loan with that lender.

Here’s how to prove your income:

Employed by someone else

If you’re an employee, you can show your personal loan lender any of these documents:

Pay stubs

W-2 tax forms

Bank statements with your income deposits

Income tax returns

Lenders might ask for your employer’s name and contact information. And they might call your employer to verify that your employment and income information is correct. You should tell your employer to expect this call. But don’t worry. They won’t share any information about your loan application. This is a standard practice by lenders, and as long as the information you provide is accurate, there shouldn’t be any problems.

Self-employed

If you own your own business, these documents can provide proof of income:

1099 tax forms

Income tax returns

Bank statements with your income deposits

Don’t forget to include documentation of any extra income you earn on the side—it could be enough to bring your income up to the required minimum amount.

4. Recurring monthly expenses

Even if you earn a steady monthly income, lenders want to feel confident that you can afford your loan payments. So they’ll often ask to see your current expenses, including things like:

Mortgage or rent

Utilities

Car loan payments

Insurance payments

Student loan payments

Credit card payments

Lenders subtract these recurring expenses from your monthly income to determine how much money you have leftover in your budget to make a personal loan payment.

5. Your credit score

Lenders also review your credit score during a personal loan application. Your credit score is a three-digit number between 300 and 850 that gives lenders an idea of how likely you are to make payments on time. While they can (and will) access this information on their own, it’s a good idea to review your credit report before you apply. This way, you can make sure there aren’t any errors.

At you can check your credit score with each of the national credit bureaus every 12 months for free. (Note: due to COVID-19, you can now check your credit score for free once a week until April 2021.) You can also go directly to the website of any of the three credit bureaus to request your report:

Can I get a personal loan with no credit history?

If you don’t have any credit history, you may still qualify for a personal loan. You just need to find a lender who is willing to accept your application. Instead of using your credit history to assess your creditworthiness, the lender may ask for documentation of your payment history or bank account activity.

6. Your purpose for the personal loan

Finally, be prepared to explain what you plan to use the loan for. Personal loans can be used for many things, including:

Unexpected expenses

Home repairs and improvements

Medical bills

Debts owed to family members or friends

A wedding or vacation

Car repairs

Large purchases

Debt consolidation

Although you can use a personal loan to pay for many things, you can’t use it to pay for anything. For example, a personal loan can’t be used for student loans or business expenses.

You may need to tell your lender how much money you want to borrow. Make sure you know the exact number—you don’t want to pay any interest on money you don’t need.

Lenders have the final decision about the amount of your loan. When you ask for the right amount for the right reason, and you’re in a good financial situation to repay the loan, you’re likely to be approved.

What if I don’t get approved?

If you don’t get approved for your personal loan, you still have a few options:

Apply with a cosigner. A cosigner is usually a family member or a close friend who adds their name to your personal loan application. Your cosigner should have a high credit score. If you fail to make your regular payments on time, your lender will require your cosigner to make the payments instead. If your cosigner has good credit, your lender can trust that they’ll pay on time if you don’t. Your cosigner will typically need to provide the same documents that you do during the application process. Apply for a secured personal loan. You could improve your chances next time by applying for a secured loan. Most personal loans are unsecured, which means they don’t require collateral (such as your house, car, or anything else of value that you own). Secured personal loans use collateral to ensure the lender will get their money back. Your lender can take this collateral if you fail to make your payments. Be prepared to provide documentation showing the value of your collateral and proof that you own it.

Apply for your personal loan from Oportun today

Applying for a personal loan starts with finding the right lender and gathering the correct documents.

If you have a limited credit history, Oportun may be the perfect lender for you. At Oportun, we offer personal loans with fixed, affordable payments to people with limited or no credit history.

At Oportun, we believe that everyone deserves the chance to get the funds they need to create a better financial future. See if you prequalify for a personal or secured personal loan from Oportun today.

Sources

Consumer Financial Protection Bureau. § 1022.123 appropriate proof of identity.

Consumer Financial Protection Bureau. Understanding your credit.

Bankrate. What documentation is required for personal loans?

The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied on as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.