Documents needed for a personal loan application

Whether you're looking to finance a purchase or find a debt consolidation loan, a personal loan could be a great option.

Most personal installment loans are unsecured, so you don't need an asset like a house to qualify. If you're hoping to consolidate high-interest debt and have a good credit score, you may get a lower rate than you're paying on credit cards. And you can use your loan proceeds for just about anything you want.

However, you can't get started using your loan until you've been approved. Here, we'll walk through personal loan requirements and give you a checklist to help make your application stress-free.

What documents are required for a personal loan?

If you're looking to get a personal loan, it's helpful to know up front what documents you'll need. Here's a rundown of what to put together:

• Proof of ID

• Proof of address

• Proof of income

• Bank account information

• Information on your existing expenses and debt

Most lenders will ask for this information as part of the personal loan application. The application will also include a document giving the lender permission to run your credit.

You can typically apply for personal loans online, though some lenders may require you to apply in person.

Why lenders ask for these documents

Lenders ask for these personal loan documents to verify that you are who you say you are and that you have the ability to repay the loan you're requesting.

Identity theft has become increasingly common. Someone could steal your identity, open a personal loan in your name, fail to repay it, and destroy your credit in the process. By verifying your identity, personal loan lenders are protecting you as well as themselves.

Also, personal loans are unsecured, which means they're not tied to another asset you own. This makes them riskier for the lender, since the lender's options are limited if you can't repay the loan.

For example, if you don't pay your mortgage, your lender could force the sale of your home through foreclosure to recover the debt. If you don't make your auto loan payments, your lender could repossess your car.

Personal loan lenders don't have the same options for getting their money back if you stop making payments on your loan. So, lenders try to lessen their risk by asking for evidence that you can handle the loan, including proof of income and information about your debts. It's also why lenders check your credit history as part of the loan approval process.

Checklist: What to prepare before you apply

A little prep could make the process of applying for a personal loan go more smoothly. Here's an easy personal loan checklist to follow.

Proof of ID

This helps the lender verify you are who you say you are. You generally only need one or two forms of ID.

• Driver's license

• Passport

• Birth certificate

Proof of address

Anything official that has both your name and your current address could work to show proof of residency.

• Utility bills

• Bank statements

• Credit card statements

• Mortgage statements

• Rental agreement

Proof of income

If you're a regular employee, a W-2 could be enough. If you're self-employed, tax returns and/or 1099 forms may be requested.

• W-2 forms

• Bank statements

• Pay stubs

• Recent tax returns

• 1099 forms if self-employed

Bank account information

These days, most loans are directly deposited into your bank account, so the lender needs to know where to send your loan funds if you're approved.

• Name of financial institution

• Bank account number

• Bank routing number

Additional financial information

If you're consolidating debt with your loan, the lender may ask for information verifying the debts you want to consolidate.

• Loan documents for existing loans

• Credit card statements

Required documents may vary by loan size and purpose

The size of your loan could shape what a lender asks for. When you request a larger amount, a lender may take a deeper look at your income and assets than it would for a smaller loan. A closer review is often a normal part of the process, so plan for a few extra requests.

Why you're borrowing can also affect the paperwork. If you're using a personal loan for debt consolidation, a lender may want statements or payoff details for the debts you plan to consolidate.

No matter your loan size or reason for borrowing, the core checklist is your starting point. Gather those documents first, and you should be in a good position to handle any lender document requests.

Common mistakes to avoid when applying for a personal loan

The nice thing about a personal loan is that once you're approved, most of the heavy lifting is done. Here's how to skirt some common personal loan application errors to avoid holding up your loan:

• Overlooked documents. Make sure to run through the personal loan checklist above so you don't get tripped up by missing paperwork.

• Incomplete information. If you don't fill in all of the required fields on your application, your loan could be delayed.

• Incorrect information. An incorrect Social Security number could cause your application to get rejected, while entering the wrong bank account details could delay your receipt of funds once your application is approved. Check your information carefully when filling out your application.

What happens after you submit your personal loan documents?

Once you submit your personal loan documents, your lender will begin the verification process. They'll verify your identity and review your financial information, such as proof of income, to decide if you qualify for a personal loan.

Your lender will also check your credit report to get a sense of your risk profile as a borrower. Your lender may also choose to contact your employer to verify your employment status. Lenders take these steps to protect themselves and reduce the likelihood of loaning money to someone who won't repay the loan.

Based on your situation, your lender may approve your personal loan application the same day you submit it, or within a few days. Once you sign your loan documents and accept the loan and its terms, your funds should be on the way. The exact timing depends on your lender and bank, but you could receive your money within a few days.

What's next: Apply for a personal loan confidently

Now that you know what documents are needed for a personal loan application, you can apply with more confidence. You may also want to check your credit score before you apply.

Compare different lenders to get an idea of rates. In fact, some lenders will allow you to get prequalified for a personal loan without a hard inquiry on your credit report.

Achieve Personal Loans could be a good place to start. You can prequalify through Achieve Personal Loans to review your estimated rates and terms. Prequalifying through Achieve Personal Loans uses a soft credit inquiry that won't impact your credit scores.

When you're ready, check your rate without any credit score impact.