How To Get A Personal Loan In 8 Steps

1. Credit Score and History

An applicant’s credit score is one of the most important factors a lender considers when evaluating a loan application. Credit scores range from 300 to 850 and are based on factors like payment history, amount of outstanding debt and length of credit history. Many lenders require applicants to have a minimum score of around 600 to qualify, but some lenders will lend to applicants without any credit history at all.

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What your credit score means

Your credit score reflects how well you’ve managed your credit. The 3-digit score, sometimes referred to as a FICO® Score, typically ranges from 300-850. Each of the 3 credit reporting agencies use different scoring systems, so the score you receive from each agency may differ. To understand how scores may vary, see how to understand credit scores.

Wells Fargo credit score standards

760+, Excellent

You generally qualify for the best rates, depending on debt-to-income (DTI) ratio and collateral value.

700-759, Good

You typically qualify for credit, depending on DTI and collateral value, but may not get the best rates.

621-699, Fair

You may have more difficulty obtaining credit, and will likely pay higher rates for it.

620 & below, Poor

You may have difficulty obtaining unsecured credit.

No credit score

You may not have built up enough credit to calculate a score, or your credit has been inactive for some time.

How to calculate your debt-to-income (DTI)

Learn how DTI is calculated, see our standards for DTI ratios, and find out how you may improve your DTI.

Understand your debt-to-income ratio

How to Qualify for a Personal Loan

There is no one formula to qualifying for a personal loan—every applicant’s financial situation is different and unique. However, there are rules of thumb and recommendations that can help you improve your chances of qualifying for a personal loan.

Most personal loan lenders review your credit score, credit history, income and DTI ratio to determine your eligibility. While the minimum requirements for each of these factors vary for each lender, our recommendations include:

  • Minimum credit score of 670. Maintaining a credit score of at least 670 will improve your chances of qualification. However, if you want to receive the most favorable terms, we recommend a minimum score of 720.
  • Consistent and steady monthly income. Minimum income requirements may vary drastically between lenders, with some having no requirements. However, it’s crucial to have consistent and steady income at the minimum to demonstrate you can afford your monthly payments.
  • DTI ratio less than 36%. While some lenders will approve a highly qualified applicant with a ratio up to 50%, it’s best to aim for a DTI that’s less than 36% to improve your chances of qualifying.

Because each lender has its own minimum requirements, it’s in your best interest to prequalify when possible and confirm with the lender what benchmarks you need to meet. This will ensure you only apply for loans that fit your specific financial situation.

Are personal loans secured?

Personal loans are typically not secured. This means that you don’t need collateral such as your house or car to secure the loan. Instead, you receive the loan based on your financial history, including your FICO Score, your income, and any other lender requirements that you must meet.

Check Your Eligibility

Visit lender websites or make phone calls to determine if your financial profile makes you eligible for a loan from that lender. Find out if there is a minimum required credit score and whether there is an income threshold. Determine if there’s a required minimum length of credit history—three years or more is common—and what is considered an acceptable debt-to-income ratio.

3. Know that loans can actually boost credit scores

If you are looking to take out a loan to consolidate credit card debt, or pay debt down faster, it can help in more ways than you may realize. Making payments in a reliable, timely manner will have a positive impact on your credit score as the lender reports these payments to the three major credit bureaus. 

Paying down debt can also help improve your credit utilization ratio, which is the percentage of available credit you are using. Experts advise keeping this ratio at 30% or below. 

Taking out a personal loan can actually help boost your credit score because your credit mix — which refers to the types of different credit accounts you have — determines 10% of your overall credit score.

5. Make sure your bank offers personal loans

To get a personal loan from a bank, you’ll generally need to be an existing customer with good credit. Some banks don’t offer personal loans, so you’ll want to find out what your bank does offer.

If your bank doesn’t offer loans — or even if it does — you may want to get quotes from online lenders and credit unions. These options can be an alternative to bank loans, or a basis for comparison.

After you’ve checked rates offered by online lenders and credit unions, see if your bank will offer you a better deal.

A personal loan to pay off debt

Taking out a personal loan can also be a way to consolidate debt. This is the idea of putting all your debts together. If you have several different debts and find it hard to keep track of them, combining them into a personal loan can make it easier to focus on sending out just one payment.

You might also be able to get a lower interest rate if you consolidate debt with a personal loan. If you have credit card debt on a few different cards that have a high interest rate, you could get an installment loan to pay off the credit card debt. Instead of paying off several debts with high interest rates, you can work toward paying off one personal loan to pay less overall.

To get a deeper dive into how installment loans work, consider these two scenarios.

1. Using a personal loan to get back on track

Sue’s daughter recently broke her leg. While her daughter’s feeling much better, the incident left Sue with a few extra medical bills she wasn’t expecting.

For this reason, Sue is looking for help to get the medical bills paid. She decides to see if a personal loan might be the solution. After researching how to apply for a personal loan, Sue learns she can take one out through a bank or online lender.

Since she doesn’t need collateral for this type of loan, Sue feels comfortable taking out a loan for $5,000 with an 8% interest rate. By taking out a personal loan, Sue can be better able to handle this unexpected expense without it being a huge financial blow.

2. Using a personal loan to consolidate debt

Jack had very little savings when he started his food truck business. To pay for supplies, he used his credit cards. He now has balances of $5,000 on two cards, and one card with a balance of $10,000. That’s $20,000 of debt that needs to be paid off.

Jack researches his options and finds out he can get a $20,000 personal loan to pay off his debt. Jack’s credit cards have high interest rates, ranging from 10% to 20% on the balances. Instead of paying hundreds of dollars on interest, he can save by putting the amounts together in a personal loan to focus on paying off the lump sum of $20,000. And since his loan has an interest rate of just 8%, this lowers the amount he’ll pay overall on the debt.

Application Checklist

Here are a few things we’ll need to know to apply for a personal loan:

  • How much you want to borrow for your loan
  • How long you’d like to finance your loan 
  • Current employment and income (including your employer’s name and contact information) 
  • Your contact information, including phone number and email (If you’d like your loan documents sent to an address other than your address of record or to a Navy Federal branch, please call 1-888-842-6328) 
  • Information about your co-applicant, if applicable (date of birth, address, phone number, email, income, employer’s name and phone number, Social Security Number, NFCU Access Number)

Tips for speeding up the process

If you’re looking for a personal loan, you likely want to get your hands on the money as soon as you can. These tips can help you avoid delays when applying for a personal loan”

  • Check your credit report before applying. Know where your credit stands before shopping around for personal loans. Good credit can make it easier to qualify for a personal loan at a lower interest rate. Furthermore, spotting and correcting errors immediately is a simple way to avoid issues later on when you’re applying for a loan. Pay off debt. If you have debt and you don’t need the loan funds urgently, paying some debt off can raise your credit score and lower your DTI ratio, which can increase your chances of approval.
  • Talk to your existing financial institution. Banks and credit unions might be more willing to consider a personal loan application from a customer with whom it’s had a positive, long-standing relationship.
  • Get prequalified. Some lenders have a prequalification process that you can undergo without a hard credit check. You can also get an idea of what your loan rates and terms may be before you apply to determine if moving forward with the lender is worthwhile.
  • Consider online lenders. Many online lenders offer next-day loan decisions, and funds may be deposited into your bank account within a few days after applying if you are approved.
  • Pick loan funds up in person. If your lender has a brick-and-mortar location, ask if there is an option to pick funds up at the branch so you can get the money faster.

Comparing other financing options to personal loans

Personal loans may not be the right solution for everyone. Be sure to compare and contrast the pros and cons of various funding options before you make a decision.

Credit cards vs. personal loans
Advantages Disadvantages
  • Can borrow smaller amounts of money
  • Won’t owe interest if balance paid off at end of billing cycle
  • Potentially earn rewards on purchases depending on card
  • Interest rates can be higher, especially if qualified for best personal loan rates
  • Payment amounts less consistent
  • Rewards could tempt borrower into cycle of debt that’s hard to escape
Credit cards with 0% intro APR on balance transfers vs. personal loans
Advantage Disadvantage
  • Can refinance debt at 0% APR for fixed amount of time as long as minimum monthly payments are met
  • Could pay higher interest rates for missed payments or by not paying off debt by end of offer period
Home equity lines of credit (HELOCs) vs. personal loans
Advantages Disadvantages
  • Interest rates typically lower than personal loans
  • Could potentially borrow more money, depending on equity in home
  • Credit accessible whenever needed
  • Could lose home if default on HELOC
  • Temptation to overspend if granted high borrowing limit
Borrowing from family or friends vs. personal loans
Advantages Disadvantages
  • Credit score doesn’t matter
  • May not owe interest depending on agreement
  • Could damage relationship for failure to pay
  • Friends or family may feel entitled to influence management of finances

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