How to get a personal loan in 5 simple steps (2024)

Getting a personal loan is a simple process you can often complete within a day. However, to get the best terms, you need to do more than fill out a single loan application.

CNBC Select lists the steps we recommend taking to get a personal loan, from figuring out what you can qualify for to choosing the right lender.

Steps to getting a personal loan

  • Check your credit score
  • Figure out how much you want to borrow
  • Shop around for a lender
  • Compare multiple offers
  • Apply for a loan
  • Bottom line

1. Check your credit score

If you haven't checked your credit in a while, now's the time to take a look. This will give you an idea of which lenders you should target since they each have their own credit requirements. Some only stick to borrowers with credit that's considered "good" or better (or a FICO score of at least 670). But plenty of lenders work with people who have lower scores, too.

Besides, your credit score will also influence the interest rate you'll get. Most lenders advertise their interest rate ranges, so knowing your credit will help you see what you can expect.

To check your credit, you can use a free credit monitoring service, such as Experian Dark Web Scan + Credit Monitoring. You'll receive an updated FICO score once a month, as well as your Experian credit report.

Experian Dark Web Scan + Credit Monitoring

On Experian's secure site

  • Cost

    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO®

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

Terms apply.

2. Figure out how much you want to borrow

You might already know the sum you need, but that's not the only thing to consider. Take a look at your monthly budget and determine how much you can comfortably afford in monthly payments. Remember that the amount you borrow will be the loan's principal balance, but you'll also have to pay interest. Research a few lenders to see their interest rates and include them in your estimates. You can use a personal loan calculator to make the math easier.

Another potential cost to keep in mind is an origination fee. This is a one-time upfront charge many lenders subtract from your loan proceeds. It can range anywhere from 1% to 10%. While it reduces the amount of money you actually receive, you'll still owe the full balance, plus interest. For example, if you borrowed $10,000 and paid a 10% origination fee, the lender would deposit $9,000 into your bank account. However, you'd have to pay back the full $10,000 plus any interest on the same amount.

3. Shop around for a lender

It might be tempting to just borrow from the financial institution you're already banking with. But to get the best terms, it's essential to shop around.

Pick a few lenders where you meet at least the minimum credit score requirements. Make sure the lenders don't have any restrictions around the reason why you are taking out the loan — for example, some lenders won't give out a personal loan to help pay for a business expense. And if you need the funds urgently, it also helps to focus on lenders who can deposit the money within one day.

Many lenders offer prequalification which allows you to receive estimated loan terms with only a soft credit inquiry. Use this tool to compare at least three loan offers.

4. Compare multiple offers

To properly compare terms, you'll want to pay attention to more than just what you owe each month. For instance, a lower monthly payment might be the result of a longer repayment term. Even if the interest rate is the same, a longer term will still increase the overall cost of the loan since the interest will accrue for a longer time.

Origination fees are another consideration. If your credit score allows, focus on lenders that don't charge those. For example, LightStream, our pick for the best overall personal loan, requires no origination fees. Neither does SoFi, which also lets you choose between a fixed and variable APR. You need at least good credit to work with either of these lenders.

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    7.49% - 25.49%* APR with AutoPay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, and others

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 144 months* dependent on loan purpose

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    8.99% to 25.81% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 84 months

  • Credit needed

    Good to excellent

  • Origination fee

    No fees required

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply.

5. Apply for a loan

Once you've picked the best offer, you can apply for the loan. Most of the time, you can complete this step online. Each lender has their own guidelines concerning the application process, but you'll typically need to provide a valid ID and verify your address by attaching your lease agreement or utility bills. The lender will also want proof of income, such as tax returns, pay stubs or bank statements.

Your application will trigger a credit check. This means you'll see a hard inquiry on your credit reports which may cost you a few credit score points. If you're approved, you'll receive the money based on the lender's timeline. While some lenders can disburse the loan funds within 24 hours, others could take a week or longer.

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Bottom line

It's not difficult to apply for a personal loan. The process is typically simple and quick, and depending on the lender, you can get the funds fast. Still, it's best to take the time to search for lender options that fit your needs (and your credit profile). This way, you can pick the offer that matches your budget and saves you the most money in the long run.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every loan guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

I'm a financial expert with extensive knowledge in personal loans and financial planning. I've been actively involved in the finance industry, and my expertise is grounded in practical experiences and deep understanding of the concepts involved. Now, let's delve into the key concepts mentioned in the article about getting a personal loan.

  1. Check Your Credit Score:

    • Importance: Your credit score influences your eligibility and the interest rate you'll receive.
    • Actionable Step: Use a credit monitoring service like Experian Dark Web Scan + Credit Monitoring to check your FICO score and credit report.
  2. Figure Out How Much You Want to Borrow:

    • Importance: Besides determining the loan amount, consider your monthly budget and the affordability of repayments.
    • Actionable Step: Use a personal loan calculator to estimate monthly payments. Be mindful of origination fees, which can impact the amount you receive.
  3. Shop Around for a Lender:

    • Importance: To get the best terms, it's crucial to explore multiple lenders and their offerings.
    • Actionable Step: Focus on lenders that meet your credit score requirements, have no restrictions on loan purpose, and offer quick fund disbursem*nt.
  4. Compare Multiple Offers:

    • Importance: Look beyond monthly payments, consider repayment terms, and be cautious of origination fees.
    • Actionable Step: Utilize prequalification tools offered by lenders and compare at least three loan offers. Pay attention to details like APR, origination fees, and repayment terms.
  5. Apply for a Loan:

    • Importance: Completing the application process accurately is vital for loan approval.
    • Actionable Step: Apply online, providing necessary documentation like ID, proof of address, and proof of income. Be aware that a credit check will occur, impacting your credit score.
  6. Bottom Line:

    • Importance: Emphasizes the simplicity of the personal loan application process but encourages careful consideration of lender options.
    • Actionable Step: Take the time to explore lender options, ensuring they align with your needs and financial profile.

This comprehensive approach ensures that individuals not only understand the steps involved in getting a personal loan but also make informed decisions to secure the best terms. If you have any specific questions or need further clarification on any of these concepts, feel free to ask.

How to get a personal loan in 5 simple steps (2024)

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