education housing business disaster relief and more Unlike grants and benefits government loans must be repaid often with interest Most lenders have similar requirements for personal loans, although the specific qualification standards may vary by lender For example two lenders might consider your credit score but one might require a higher credit score than the other Here are some other common requirements they might consider
Credit Score and History
An applicant’s credit score is one of the most important factors a lender considers when you apply for a personal loan 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 have a personal loan credit score requirement of at least 600 to qualify but some lenders will lend to applicants without any credit history at all Lenders impose income requirements on borrowers to ensure they have the means to repay a new loan Minimum income requirements vary by lender For example, SoFi imposes a minimum annual salary requirement of at least Avant’s annual income minimum requirement is just Don’t be surprised, however, if your lender doesn’t disclose minimum income requirements Many dont
Evidence of income may include recent tax
pay stubs and signed letters from employers self-employed applicants can provide tax returns or bank depositsDebt-to-income ratio DTI is expressed as a percentage and represents the portion of a borrowers gross monthly income that goes toward her monthly debt service Lenders use DTI to predict a prospective borrowers ability to make payments on new and current debt For that reason a DTI less than 36 is idea though some lenders will approve a highly qualified applicant with a ratio up to
If youre applying for a secured personal loan, your lender will require you to pledge valuable assets or collateral. In the case of loans for homes or vehicles, the collateral is typically related to the underlying purpose of the loan. However, secured personal loans can also be collateralized by other valuable assets including cash accounts investment accounts real estate and collectibles like coins or precious metals
payments or default on your loan the lender can repossess the collatera
Though not part of the qualification process, many lenders require borrowers to pay personal loan origination fees to cover the costs of processing applications, running credit checks and closing. These fees usually range between 1% and 8% of the total loan amount, depending on factors like the applicant’s credit score and loan amount. Some lenders collect origination fees as cash at closing, while others finance them as part of the loan amount or subtract them from the total loan amount disbursed at closing When is time to formally apply for a personal loan your lender will request documents to confirm everything from your identity to your residence and employment. Here are the most common documents lenders require as part of the personal loan application process
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5 Personal Loan Requirements To Know Before Applying
Kiah Treece
Loans Writer
Jordan Tarver
Lead Editor, Mortgages & Loans
Reviewed
Personal Loan Requirements To Know Before Applying Getty
Most lenders have similar requirements for personal loans, although the specific qualification standards may vary by lender. For example, two lenders might consider your credit score, but one might require a higher credit score than the other. Here are some other common requirements they might consider:
Credit score and history
Income
Debt-to-income ratio
Collateral
Origination fee
- Credit Score and History
An applicant’s credit score is one of the most important factors a lender considers when you apply for a personal loan. 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 have a personal loan credit score requirement of at least 600 to qualify, but some lenders will lend to applicants without any credit history at all. - Income
Lenders impose income requirements on borrowers to ensure they have the means to repay a new loan. Minimum income requirements vary by lender. For example, SoFi imposes a minimum annual salary requirement of at least $45,000; Avant’s annual income minimum requirement is just $20,000. Don’t be surprised, however, if your lender doesn’t disclose minimum income requirements. Many don’t.
Evidence of income may include recent tax returns, monthly bank statements, pay stubs and signed letters from employers; self-employed applicants can provide tax returns or bank deposits.
- Debt-to-income Ratio
Debt-to-income ratio (DTI) is expressed as a percentage and represents the portion of a borrower’s gross monthly income that goes toward her monthly debt service. Lenders use DTI to predict a prospective borrower’s ability to make payments on new and current debt. For that reason, a DTI less than 36% is ideal, though some lenders will approve a highly qualified applicant with a ratio up to 50%. - Collateral
If you’re applying for a secured personal loan, your lender will require you to pledge valuable assets—or collateral. In the case of loans for homes or vehicles, the collateral is typically related to the underlying purpose of the loan. However, secured personal loans can also be collateralized by other valuable assets, including cash accounts, investment accounts, real estate and collectibles like coins or precious metals.
If you fall behind on your payments or default on your loan, the lender can repossess the collateral to recoup the remaining loan balance.
- Origination Fee
Though not part of the qualification process, many lenders require borrowers to pay personal loan origination fees to cover the costs of processing applications, running credit checks and closing. These fees usually range between 1% and 8% of the total loan amount, depending on factors like the applicant’s credit score and loan amount. Some lenders collect origination fees as cash at closing, while others finance them as part of the loan amount or subtract them from the total loan amount disbursed at closing.
4 Personal Loan Documents Your Lender May Require
When it’s time to formally apply for a personal loan, your lender will request documents to confirm everything from your identity to your residence and employment. Here are the most common documents lenders require as part of the personal loan application process.
Loan Application
A loan application is a formal document that lenders require prospective borrowers to complete and submit to begin the lending process. Each lender has its own application so the specific requirements may vary. In general though youll need to provide basic personal information, how much you want to borrow and the purpose of the loan
The format of a loan application may also vary by lender While there are numerous online lenders that offer a completely online application experience others may need to discuss your application over the phone before providing a decision There are also a number of brick-and-mortar banks and financial institutions that require applicants to submit a paper application in-person interview
