How to apply for a personal loan

Shanzaib Malik
An image about how to apply for a personal loan

So, you need a loan, and you’re asking yourself: How do I apply for a personal loan?

Applying for a loan begins with deciding how much you need to borrow before checking your credit and prequalifying to compare personal loan offers.

While the whole process may seem overwhelming initially, below is a ten-step process that will help show you how to apply for a personal loan.

Step 1: Figure out how much you need to borrow

Start the process by figuring out how much you need to borrow. When you take out a personal loan, you have to pay interest. Instead of paying interest on the money you probably won’t need, make sure you only borrow what’s necessary.

However, if you borrow less than you need, you may end up in a situation where you take out an expensive loan because you ran out of options at the last minute.

Another critical fact to consider is the monthly or bi-weekly repayment amount. Make sure you can afford the monthly payments while leaving enough income to cover emergency expenses if or when they arise.

Step 2: Check your credit score

The amount you’re allowed to borrow and the interest rate you receive depends heavily on your credit score. Understanding your credit score and what’s listed on your credit report will help you better understand the types of offers you will receive.

Checking your credit report also allows you to identify potential errors that could artificially reduce your score. Finding errors in your credit report is not as uncommon as you might think; it’s a problem affecting more than one-third, or 34% of Americans, according to a new consumer reports investigation.

How do I check my credit score?

You can obtain a free credit report from any credit bureau once a year by visiting

Companies like Credit Karma, Credit Sesame, Mint, and myFico also provide access to your credit report and other services to help you improve your score.

How does my credit score impact personal loan offers?

Your credit score helps lenders figure out whether to trust you or not.

A good or excellent credit score, i.e., those with FICO scores of 680 or above, typically receive the lowest rates on personal loans.

On the other hand, if your FICO score is below 500, you may find it challenging to secure affordable credit or any at all for that matter.

Step 3: Explore your options and choose a loan type

There’s more than one type of personal loan, and there are hundreds of lenders; so where do you begin? Understanding the different kinds of personal loans will help you choose one that works best for you.

Unsecured Personal Loans

Unsecured personal loans are the most common type of loans you will find. The word “unsecured” means that you are borrowing money without putting up any assets as collateral to “secure” the loan.

i.e., if you borrow money and put your car up as collateral, lenders will feel more secure about lending you money because they know that if you don’t pay, they can repossess your vehicle and sell it to make their money back.

You can use these loans for whatever you want, except for starting a business. The payments are manageable and relatively easy to qualify for if you have a decent credit score.

Secured Personal Loans

Secured personal loans require collateral – like a home or vehicle, to qualify. If you miss your payments, your lender can repossess the assets you put up as collateral to make their money back. An example of a secured loan is an Auto or Home loan.

Secured loans are typically much easier to get, even if you have a bad credit score. By reducing the risk of lenders not getting paid on time, they are more willing to extend loans to less creditworthy individuals at lower rates.

Secured loans are a lot riskier for the consumer, especially if you have a low disposable income, little savings, and are susceptible to financial shocks.

Revolving Credit

A credit card is an example of a revolving line of credit. When you apply for a credit card, you receive a maximum limit you cannot surpass. You can charge payments towards the card up to the maximum amount set by your bank or lender.

If you repay the balance in full within a month, you won’t have to pay any interest. However, interest will begin accruing if you hold a balance on your card.

Revolving lines of credit are great for people with a solid grip on their spending. By charging payments to a credit card, you can earn rewards and other benefits that build up over time.

Fixed-rate loans

Fixed-rate loans have interest rates that don’t change throughout the loan.

Many installment loans, like personal, student, and car loans, feature fixed interest rates.

While having interest rates that don’t change can be a huge plus, you could be paying a little more than a variable rate loan.

Variable-rate loans

A variable rate loan has interest rates that could fluctuate based on the index rate. If the index rate goes up, so too will your interest rates. If the index rate goes down, your interest rate will go down.

An example of variable rate loans includes student loans and credit cards.

Unlike fixed-rate loans, a variable rate could potentially save you money throughout your loan.

However, as we near a recession, and the federal reserve interest rate, so will variable interest rates, making it a more expensive option in the upcoming years.

Co-signed loans

When you apply for a loan, lenders will base your offers and interest rates on your credit score. So, what do you do if you have a bad credit score? That’s where co-signed loans come in!

If your parents or best friend has a great credit score, see if they’re willing to become a co-signer on your loan.

By asking someone with a good credit score to become your co-signer, your lender will feel more comfortable extending an offer with reasonable interest rates.

Payday Loans

A payday loan is a short-term, high-cost loan, generally for $300 or less.

On the one hand, they can be helpful because payday loans don’t require a minimum credit score or credit checks.

On the other hand, they are the most expensive option for borrowing money primarily because of their target borrowers.

Payday lenders charge more than 600% APR and trap their borrowers in cycles of debt with late fees and rollover fees that add up over time. 

Payroll Deduction Loans

A payroll deduction loan is similar to a traditional personal loan, but repayments are taken directly from your monthly paycheck.

Payroll deduction lenders look beyond your credit score and consider factors like work history and education.

By linking payments to your salary, they help you pay on time and pass on savings through lower interest and higher acceptance rates.

Stately Credit offers payroll deduction loans at affordable rates; learn more about how we can help you!

Step 4: Choose a lender or use a comparison site.

So, you’ve figured out what type of loan you need and how much you want to borrow. What’s next? Find a lender or use a price comparison site to help narrow your choices.

If you’re looking for a traditional personal loan, search on google for “personal loan lenders” in the US or the state you reside in. Similarly, if you need a “payroll deduction loan,” a simple google search will help you identify promising companies.

If you’re looking for a good comparison site to use, check out the following websites:

  • Bankrate
  • Nerdwallet
  • Credible
  • Credit Karma

How do I choose the best personal loan?

When it comes to borrowing money, the most important factors are the following:

  • APR (interest rate + fees)
  • Monthly Payment

While the loan’s APR is important, it’s not the only factor you should consider.

For example, let’s say you need to borrow $2,000 to repair your vehicle:

  • Lender A offers you a $2,000 personal loan at 6% APR, with a maximum repayment term of 1 year. Your monthly payment is $172
  • Lender B offers you a $2,000 personal loan at 19.9% APR, with a maximum repayment term of 5 years. Your monthly payment is $52.

Compare the two offers above; which one would you go with?

Families dealing with small disposable incomes may find that Lender B has the more attractive loan terms because the monthly payment is lower and more affordable. The interest rate is higher, but paying $172 a month may be unaffordable for some, even with such a low-interest rate.

Step 5: Gather documents

Once you’ve chosen a loan type with features that suit your current financial situation, the next step is to gather the documents you typically need to apply for a personal loan.

What do I need for my loan application?

If you’re applying with a traditional lender, they may require you to submit several documents. Some of them include the following:

  • Proof of address – a lease or utility bill will suffice
  • Proof of employment status
  • Education history – including the schools you’ve attended, the highest degree you’ve earned, and your graduation date.
  • Social Security Number – used to verify your identity and prevent fraud
  • Income details – Your base annual income, along with any additional income you receive, will be considered
  • Proof of identity – a government ID, utility bill, or lease agreement

However, applying for a personal loan with Stately Credit doesn’t require you to submit any documents!

As a payroll deduction lender, Stately Credit integrates with payroll software providers, enabling us to automatically verify income & employment and process payroll deductions for loans.

All you have to do Is sign in to your work account (or retrieve your details), and we pre-fill the rest of the loan application for you.

Step 6: Consider ways to increase the chances of approval

Will I get approved, or am I just wasting my time? You can take plenty of steps to improve your chances of approval if you’re worried about submitting a bunch of applications without receiving the loan you need.

Clean up your credit history

Your credit score is a significant factor in whether you will be approved. The higher your score, the better your chances of getting approved. Here’s what you can do to improve your credit history before taking the plunge and applying.

Check your credit report for errors.

According to a Consumer Reports investigation, more than one-third (34%) of Americans found at least one error on their credit report. That’s a huge number!

Checking your credit report for errors can help ensure you receive an offer you deserve. But how do you go about checking your account for errors? Be on the lookout for the following:

  • Identity Errors: File a report if you see your name, phone number, or home address is incorrect. If you find accounts belonging to another person or someone with a similar name as yours or accounts you don’t recognize, take a note of it and continue searching.
  • Incorrect Reporting of Account Status: If you find closed accounts reported as open or accounts registered as the owner when you’re just an authorized user, take a note of it and continue to the next check. If you also find accounts that are incorrectly reported as late or delinquent, or have incorrect payment dates, take note of it and continue.
  • Debt Management Errors: If you find information that was re-inserted after being reported as false or accounts that appear multiple times with different creditors listed, take a note of it and move on to the next check
  • Balance Errors: If you see accounts with an incorrect balance or credit limit, flag the error.

After going through all the checks above, and you find errors, contact the credit reporting agency who sent you the report and the creditor or company that provided the information. You can use a sample dispute letter to send to credit reporting agencies and correct the mistake.

Ensure you’re making monthly payments on time

One of the best ways to improve your chances of approval is to make sure you’re making your current loan payments on time. Being extra diligent in loan repayments could strengthen your payment history and credit utilization ratio and increase the chances of future approvals.

Request a credit limit increase

A good credit utilization ratio is anything below 30%; however, keeping your utilization between 1% and 10% increases your chances of improving your credit score.

By requesting a credit limit increase, you effectively decrease your credit utilization ratio while spending the same amount.

For example, let’s say you have a credit card with a $5,000 limit, and you spend on average $500 on the card per month. Your credit utilization ratio in this scenario would be 10%.

Let’s say you requested a credit limit increase, and your lender agreed to increase it to $10,000. If you continue spending $500 a month, your new credit utilization ratio would be 5%, and your credit score would improve.

Pay off some debts

Paying off some debts will help reduce your Debt-To-Income ratio and increase the total amount you can borrow, along with your chances of approval. Not all lenders have strict debt-to-income requirements, but many do.

Many lenders also use your debt-to-income ratio to calculate the maximum amount they can lend to you specifically.

Don’t apply for too much.

Requesting more money than you need can be a risk factor for lenders and may reduce your chances of approval. Larger personal loans can also restrict your budget and make it challenging to repay your obligations on time.

Use a personal loan calculator to estimate your monthly payments and assess whether it’s affordable for you or not.

Step 7: Prequalify for loans.

Pre-qualifying for a loan can helps you compare interest rates and monthly payments before you submit a final application.

Will pre-qualifying affect my credit score?

Submitting a pre-qualification application does not affect your credit score, so you don’t have to worry about getting penalized for applying through many lenders.

What do I need to pre-qualify for a personal loan?

To pre-qualify for a loan, you will need the following information:

  • Loan Type: What type of loan are you applying for? Some lenders only offer a kind of loan, so this option depends heavily on who you are using with
  • Loan Amount: How much do you want to borrow? Personal loans typically range from $1,000 to $25,000
  • Loan Purpose: What do you need the loan for?
  • Personal and Financial Information: Things like your first name, last name, date of birth, social security number, employer, job title, income, additional income, and more are used to calculate your offer

How long does it take to pre-qualify and apply for a personal loan?

Pre-qualifying for a personal loan usually takes seconds or minutes. Here’s what happens when you submit a pre-qualification application to a lender:

Step 1: Lender submits your personal information to a Credit Bureau

Lenders will submit all the information you listed in your application to one of three credit bureaus, Equifax, Experian, or Transunion, so they can begin performing a “soft inquiry.”

One of the big three credit bureaus will locate your credit file based on your provided information. They will then send a three-digit credit score along with thousands of attributes that your lender can use to run through an advanced statistical model. The model helps predict the probability of you not repaying on time.

Step 2: The lender checks your credit score. If your credit score is below the minimum, your application will be denied.

If your credit score is above their minimum, and there aren’t any red flags in your credit history, the lender will approve your application.

If your credit score is below their minimum, they will deny your application and explain why.

Step 3: Lender sends you offers

If your application is approved, your lender will calculate offers based on your credit history and send them back to you.

This entire three-step process takes place within seconds.

Step 8: Compare offers

With offers from multiple lenders, you are now ready to choose your loan. Compare your options and find the best loan for your financial situation.

Instead of focusing purely on the Interest rate, consider the loan term and the monthly payment amount. Some lenders only offer personal loans for up to 2 years, while others give you up to 8 years to repay. The loan term significantly impacts the monthly payment amount, so make sure you choose a loan that fits your personal situation best.

Step 9: Formally submit the application to the lender of your choice

Carefully review your chosen loan terms and conditions before submitting your application.

The loan agreement your lender will ask you to sign certifies that all the information you’ve submitted is correct, along with authorizing the lender to verify your information.

Double check the interest rate, monthly payment, and other conditions such as hidden or late fees.

How will submitting my loan application affect my credit score?

Submitting a formal loan application will not affect your credit score, and it does not automatically trigger a hard credit inquiry like many other articles suggest.

Conducting a hard credit inquiry is no longer required or necessary because lenders can view your credit score and thousands of credit attributes with a soft credit inquiry without impacting your credit score. Submitting a hard credit inquiry isn’t considered consumer-friendly, so most lenders don’t do it anymore.

How long will it take for my application to get approved?

Many lenders offer same-day approvals because their underwriting process is fully automated. Some, like Stately Credit, even offer instant approvals! Applications that require additional documents, or a manual review, will take longer. It can take up to a week if manual intervention is involved.

How long will it take to get funded?

Once approved and signed a loan agreement, you could receive funding in as little as one day or up to 3-5 days. It ultimately depends on the lender. Stately Credit uses a “push-to-card instant funding” method that funds borrowers’ accounts within minutes. If you applied for a personal loan with a large bank, expect processing times of up to 3 weeks.

How to apply for a personal loan with Stately Credit

Applying for a personal loan with Stately Credit is 10x easier. All you have to do is the following:

  • 1. Choose your loan type and the amount you wish to borrow
  • 2. Sign in to your work account (or retrieve your details)
  • 3. We pre-fill your loan application with information in your work account    (e.g., first name, last name, date of birth, social security number, employee id, job title, annual income, etc.)
  • 4. Review your information and submit it.
  • 5. View your offers!

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