What Documents Are Required for a Personal Loan?

A personal loan can be a great way to pay for a home renovation project, fund a big expense, pay for a family vacation, or just cover unexpected costs that crop up. You can also use a personal loan to consolidate credit card debt and other outstanding balances, both to simplify repayment and save yourself money.

Applying for a personal loan can be a quick process, especially if you apply online, but there are some documents you’ll probably need to provide as part of the process.

Here’s a look at how it all works, which documents to be sure to have on hand, and what you can do to make it move as quickly as possible.

How to get a personal loan in 6 steps

No matter what your reason for shopping for a personal loan, getting one will require following the process below.

1. Determine what you need

Depending on the lender you choose, you could potentially borrow anywhere from $500 to $200,000 (sometimes more) with a personal loan. Before you can begin looking for a loan, you need to know what you plan to do with the money and how much you’d like to borrow.

If you’re consolidating debt, add up all current balances that you want to pay off. In some cases, you may need to ask for a payoff statement to get the most-up-to-date amount.

If you’re paying for a project, family vacation, or other big expense, you may want to include your projected cost plus a small overage in case of unexpected labor costs, travel fees, etc.

2. Calculate what you can afford

Immediately after taking out a personal loan, your interest will begin to accrue and you’ll be expected to start making payments. It’s important to factor these payments into your monthly budget to ensure that you will be able to cover the added expenses until the debt is repaid.

Your monthly payment will vary based on your total loan amount, the loan term you choose, and the interest rate you’re offered. Look at your monthly expenses and figure out how much you could spare for loan payments. Knowing this ahead of time will help you choose the right loan and repayment term.

3. Find the best personal loan rates and terms

Now that you have an idea of what you need, it’s time to start looking at and comparing lenders. Chances are that most lenders will offer the loan amounts and terms you want (or close to them), so what you really want to compare are the interest rates. As you do so, use a loan calculator to play around with what different loan rates and terms will mean for your monthly repayment amount on loans of different sizes.

Loan rate

Many lenders will allow you to check your rate with a soft credit pull, which won’t affect your score and can take just seconds online. The rate you’re offered is based on how much you borrow, the repayment term you choose, and personal factors such as your credit score and income. A rate check or preapproved offer is subject to change once you submit a formal application, but can still give you a good idea of the rate(s) for which you qualify.

This rate, expressed as an APR (annual percentage rate), is your new loan’s overall cost. The lower the rate, the more affordable your personal loan will be.

Loan term

The other key factor in how big your payment will be is the term of the loan. The longer you have to pay it back, the lower your monthly payment. However, a longer term means that you’ll eventually pay more in interest to borrow the money, so get the shortest term you can afford.

4. Apply for your loan

Once you’ve narrowed your options, it’s time to formally apply for your loan. You can choose to apply through one of the lenders from which you already got rates and a pre-approval, or another lender altogether. You can even opt to apply with multiple lenders at the same time and choose the one offering the best terms.

This application process usually involves a hard credit check (or pull), which will show up as an inquiry on your credit report. Using this information that the lender receives from the credit bureaus, it is able to make a specific loan offer with defined terms and rates. Once you accept this offer, the terms won’t change.

5. Provide documentation and sign lender documents

You found the perfect loan—now what? It’s time to finalize the loan by providing the lender with any documentation required and signing your loan paperwork.

Your lender may request certain verification documents such as:

• Proof of identity, including a copy of your driver’s license or state ID.
• Proof of employment and income, usually with your most recent paystubs or W-2.

The lender will also send over certain documents for you to read and sign. These can include:

• Loan disclosures.
• Borrowing terms and loan details (including your rate, loan amount, and repayment term).
• Promissory note—n your guarantee to repay the loan as promised.

These documents can usually be uploaded and signed online, but having them available and ready in PDF form can speed up the entire personal loan process.

6. Receive funds

Your loan has been verified and signed—now all that’s left is to receive your money.

Some lenders can fund your loan as quickly as the same day. Others may take a few business days to send your funds electronically. You may also have the option to pick up a check at a local bank branch (if applicable) or have your lender send you a paper check in the mail.

How to qualify for a personal loan

Each lender has its own qualifications and personal loan requirements, which may also vary depending on how much you want to borrow and even where you’re located.

In general, personal loan eligibility hinges on factors such as your:

• Requested loan amount.
• Desired loan term.
• Income.
• Debt-to-income ratio (DTI).
• Credit history and score.

Even if you do qualify for a loan, these factors may impact the loan repayment terms you’re offered and the interest rate you’re given on the amount borrowed.

Tips for speeding up the loan-application process

Whether you need money fast or just don’t want to spend all day dealing with loan documents, here are some tips for speeding up the loan-application process.

Have your documents ready

You’ll make the entire process move faster, start to finish, if you have the documents and information you’ll need on-hand and available before you ever apply.

The documentation required will depend on the lender and your situation, but (as noted earlier) may include:

• Proof of identification (such as a driver’s license, Social Security Card, government-issued ID, etc.).
• Proof of employment and income (most recent pay stubs, W-2s, or even past tax returns).

Have your loan-funding information ready

Know your loan-funding preferences and gather the information you’ll need to execute them. Do you want to receive your loan funds directly into your bank account or would you prefer a check be mailed to your home? If offered, would you rather pick up a check from a local branch of your financial institution?

The information you’ll need could include your bank name, routing number, account number, and bank mailing address. In the case of a wire transfer, you’ll need your bank’s ABA routing number.

What to do if you are denied a personal loan

There are many reasons you might be denied a personal loan, especially during a time when financial institutions are tightening up their lending. You might be denied due to your income, because your DTI (debt-to-income ratio) is too high or your credit score is too low—or because you asked to borrow too much for your financial circumstances.

If you are denied but still need to borrow funds, consider alternatives to a personal loan. These include:

• Borrowing against your home’s equity with a home equity loan, HELOC (home equity line of credit), or cash-out refinance.
• Taking out a cash advance against your credit card.
• Utilizing available savings.
• Making purchases with a credit card or available line of credit.
• Looking into a secured personal loan, using another asset as collateral.

TIME Stamp: Securing necessary documents expedites the process

A personal loan can be a great way to access the cash you need for any number of purposes, whether you’re facing an unplanned expense or trying to pay for a large purchase. Before approving you for a personal loan and disbursing your funds, though, the lender will ask for certain information and documentation. Having these documents on hand can speed up the approval process and get your personal loan funds to you even faster.

Frequently asked questions (FAQs)

What can be used as collateral for a personal loan?

A personal loan is usually unsecured, meaning that it doesn’t require collateral. However, secured personal loans are available through some lenders, and may be a good option if you’re unable to get approved for an unsecured loan or can’t get the loan terms you want.

Examples of collateral that you can use to secure a personal loan include savings or investment accounts; tangible assets such as real estate, cars, art, and jewelry—or even your future earnings.

Can you get a personal loan without income proof?

Lenders will, at the very least, ask about your household income. In some cases, this is sufficient and no proof is necessary. Other borrowers may be asked to provide proof of this income and/or employment status by uploading a recent pay stub, W-2, bank statement, etc.

What disqualifies you from getting a personal loan?

You may be ineligible to take out a personal loan if you don’t meet the lender’s requirements. These could include a credit score threshold, maximum debt-to-income ratio (DTI), or income limit. Lenders may also disqualify you based on your credit history—because it’s just too limited or reveals such negatives as charge-offs, accounts in collection, or bankruptcy.