How to get a personal loan

Credit card debt, home improvements, an unexpected medical bill—sometimes life calls for a little extra flexibility. A personal loan could be a smart, flexible way to handle those costs, with clear terms, manageable payments, and a plan you can feel good about. With the right approach, it could help you move forward with confidence and keep your finances on track.

With a personal loan, you get a lump sum to use for nearly any purpose with predictable payments. Also, the APR on a personal loan is generally lower than you’ll find on most credit cards. Some online personal loans can be approved within minutes, and you could potentially get funds as soon as the next business day.

You’re ready to get a loan, but how do you pick the very best? Here’s how to find—and get—the personal loan that fits your needs. 

How to get a personal loan (step by step)

To get a personal loan, check your credit, compare lenders, and prequalify to find out estimated rates without hurting your score. Choose the loan term and amount that work with your budget, then complete a formal application and review your offer before accepting funds.

How to get a personal loan, in six steps:

• Decide how much you need to meet your financial goal. Only borrow what you need to avoid extra fees.

• Check your credit score and debt-to-income ratio (DTI). Lenders use both to determine how much you qualify to borrow and what your rate will be. 

• Compare lenders using prequalification. Prequalifying lets you estimate your loan size and terms using a soft credit inquiry that won't hurt your credit.

• Review loan terms and choose a lender. Make sure to look at the monthly payment as well as the total loan cost and other fees.

• Submit an application. Online lenders could give you a decision within minutes, though it may take a few days in some cases.

• Review results and accept funds if approved. Funds could hit your account as soon as the next business day.

Where to get a personal loan

Banks, credit unions, and online lenders all typically offer personal loans. 

Banks offer many loan options, as well as physical branches you can go to for in-person help. Rates are sometimes competitive, though banks often charge more fees than other lenders. If you already have an account at a bank, you might qualify for perks like rate discounts, fee waivers, or faster approval.

Credit unions typically offer lower rates and fewer fees than other lenders, though the best deal still depends on your qualifications and needs. You must be a member of the credit union to take out a loan, which may limit your options. Many credit unions are community-based and operate local branches that serve specific regions, employers, or member groups.

Online lenders could offer more flexible requirements and the fastest loan decision. Some even provide same-day loans or specialize in working with borrowers who have lower credit scores. 

Your options at a glance:

No matter what you choose, applications are usually quick to fill out. Funding and approval times could take longer. Approval that requires a human underwriter could take up to seven days. Funding generally takes up to five, but could be same-day in some cases. All together, it's not uncommon for it to take several days up to a week or so to go from application to funding. Actual times will depend on your lender and specific situation.

How to compare loan offers

For each loan, compare:

• APR (annual percentage rate)

• Repayment term

• Fees, including origination fees

• How quickly you get the money

The APR is particularly important. Personal loan rates can have a very wide range depending on your qualifications, and personal loans lock you into term lengths that affect your monthly payments. That's why it's key to shop around.

Your goal is to find a personal loan with the lowest possible APR—the yearly cost of borrowing money, including rates and fees. A lower APR means you pay less to borrow the money. 

For example, let’s say you take out a $10,000 loan with a two-year term. Here’s how the same $10,000 loan looks with different APRs:

Most personal loans offer several term lengths, or payoff periods. A longer term gives you more time to pay the loan, so the monthly payments are smaller. However, you’ll pay more in interest fees over the life of the loan. Shorter terms have higher monthly payments, but they cost less in the long run because you pay less in interest. 

For example, say you take out a $10,000 loan with a 12% APR. A five-year term would have more total interest but a lower monthly payment. If you choose a shorter three-year term, you’ll pay more each month but less in interest overall. 

The goal is to find the sweet spot between manageable monthly payments and total interest.

Personal loan fees should be minimal. Here are some common fees:

• Prepayment penalty. A fee for paying down a loan early.

• Origination fee. About 1% to 10% of the loan balance, for taking out the loan.

• Late fees. Charged for late payments.

Personal loan funds are dispensed at different speeds. Banks and credit unions sometimes take longer, up to two weeks to process your application and deposit your money. Online lenders are sometimes faster, with loans deposited into your account same-day. This is especially pertinent when you need cash fast to cover an emergency. Check lender websites for details.

How to use prequalification to shop safely

Prequalification could help you know whether you’re likely to get a loan without filling out an actual application. Your lender performs a soft pull on your credit, meaning they check your information without impacting your credit score. (Should you decide to apply for a loan officially, the lender will perform a hard pull, which could ding your score a few points.)

Getting prequalified gives you an idea of what your rates and fees will be, as well as how much you could potentially borrow. It's not a guarantee, however. The lender will take a deeper look at your finances when you fill out the real application, and there is still a chance you're denied the loan.

It's a good idea to check your credit scores before you start loan shopping. Many lenders have their own requirements for personal loans, so knowing your score could help you save time by letting you prequalify with lenders most likely to match your needs and qualifications.

Choosing the right loan for you

You absolutely want to compare the important details, including the APR, repayment term, and other fees. But a big part of choosing the right loan is knowing what you're using it for. You’ll likely shop differently for a debt consolidation loan than you would a loan for an emergency. 

Say your car breaks down, and you need to pay the mechanic ASAP so you can get to and from work. In this case, you might prioritize a lender that can get you the money faster than the one with the absolute lowest rate.

On the other hand, if you're looking to consolidate high-interest debt, then making sure the monthly payments are manageable and that you're not paying too much in interest should be more important than lightning-fast funding.

Special situations and alternatives

Lenders sometimes offer loans for borrowers with poor or no credit history, who need money fast, or who have a high debt-to-income ratio.

If you have poor or no credit history, you could still have some options. You could apply for:

• Personal loans for poor credit. These often have higher APRs than typical, but it might be an option depending on your needs.

• Home equity loan or home equity line of credit (HELOC). These are secured loans that use your home as collateral, meaning your home backs up the loan. The rates can be lower than other forms of credit, but your home could be at risk if you can't repay the loan.

Borrowers with a high debt-to-income ratio (DTI) may have a hard time being approved for personal loans. It’s a good idea to run the numbers on your DTI. A good credit score can sometimes lower the impact of a high DTI. If your credit score or DTI pose an issue, you might apply with a co-signer. A co-signer with good credit could improve your ability to get a loan.

What’s next

Start by prequalifying with three lenders. Compare APRs, terms, fees, and funding speeds to find a loan that works well for your situation.