Here's what personal loan lenders look for when you apply
If you’re thinking about taking out a personal loan, it helps to know what lenders look for when reviewing your application.
Requirements vary by lender, but factors like your credit score, income and existing debt can all play a role in whether you’re approved. Here’s what to know before you apply.
Personal loan requirements: What lenders look for
Credit score and credit history
Lenders use your credit score and credit history to assess how likely you are to repay a loan. Generally, a higher credit score can make it easier to qualify for a personal loan and secure a lower interest rate.
A FICO® Score of 580 to 669 is considered “Fair,” but minimum credit score requirements vary by lender. For example, Upstart doesn’t require a minimum credit score in most states, instead considering factors like income and employment history when evaluating applications. Still, borrowers with lower credit scores may face higher interest rates if approved.
We like that Upstart considers factors besides credit score, including education, income and employment history. However, co-signers aren’t accepted.
- Accept applicants with bad or no credit
- Minimum APR is lower than many competitors’
- Approves personal loans up to $75,000
- Most loans are funded the next business day
- Origination fee of 0% to 10%
- Doesn’t allow co-signers or co-borrowers
If your credit score could use some work, consider improving it before applying. Factors that affect your FICO Score include payment history, amounts owed, length of credit history, credit mix and new credit. Making payments on time, paying down credit card balances and keeping older accounts open when practical may help strengthen your credit profile over time.
Income
Lenders want to make sure you have enough income to repay the loan. To verify your income, they may ask for documents like recent pay stubs, bank statements or tax returns.
Income requirements vary by lender, and some don’t publicly disclose a minimum income requirement. Lenders may also consider other factors, such as your employment history and existing debt, when evaluating your ability to repay the loan.
Debt-to-income ratio
Your debt-to-income (DTI) ratio measures how much of your gross monthly income goes toward debt payments. According to SoFi, lenders generally prefer a DTI ratio of 36% or lower for personal loans, though some may approve borrowers with ratios as high as 50%, particularly for debt consolidation loans.
You can calculate your DTI ratio by dividing your total monthly debt payments by your gross monthly income (before taxes and other deductions), then multiplying the result by 100 to get a percentage.
Co-signers or co-borrowers
If your credit score, income or debt-to-income ratio could use some work, applying with a co-signer or co-borrower may improve your chances of approval or help you qualify for better loan terms, especially if the other applicant has strong credit and finances.
However, taking on a co-signer or co-borrower is a serious commitment. A co-signer is responsible for repaying the loan if you can’t make your payments, while a co-borrower shares responsibility for the debt from the start. Missed payments can hurt both parties’ credit and potentially strain your relationship.
Some lenders may require a co-signer if you don’t meet their eligibility criteria on your own, while others don’t accept co-signers or co-borrowers at all. OneMain Financial, for example, offers joint personal loans for borrowers who want to apply together. You can apply for $1,500 to $30,000, with funds available as soon as one hour after closing when disbursed to an eligible debit card.
We like that OneMain accepts borrowers with bad credit and offers secured loans and fast funding. However, its minimum APR is on the high side and the $30,000 financing maximum may be too low if you need a larger loan.
- Approves applicants with bad/fair credit
- Same-day funding available
- Can apply with collateral
- Co-applicants allowed
- High origination fee
- High minimum interest rate
- No autopay discount
- Co-signers not allowed
*You must complete a loan application and continue to meet any criteria used to select you for a loan offer. Not all applicants are approved. Loan approval and actual loan terms depend on applicant’s state of residence and ability to meet OneMain Financial credit standards such as a responsible credit history, sufficient income after monthly expenses, and if applicable, availability of eligible collateral.
Not all approved applicants qualify for larger loan amounts, lower APRs, or the most favorable loan terms. For example, larger loan amounts typically require a first lien on a motor vehicle that is no more than ten years old, meets our value requirements, and is titled in applicant’s name with valid insurance. APRs are generally higher on loans not secured by a vehicle.
Example Loan: A $6,000 loan with a 24.99% APR that is repayable in 60 monthly installments would have monthly payments of $176.07.
OneMain charges origination fees allowed by law. Depending on the state where the loan is opened, the origination fee may be either a flat amount or a percentage of the loan amount. Flat fees vary by state, ranging from $25 to $500. Percentage-based fees vary by state, ranging from 1% to 10% of the loan amount subject to certain state limits on the fee amount.
For information about these fees and minimum and maximum loan sizes available in certain states, visit omf.com/loanfees.
Current OneMain Customers: Loan offers presented to a consumer assume the individual has no active loan with OneMain or one of its affiliates. If a customer applies for a new loan offer, a OneMain representative will discuss available options.
Active-duty military, their spouse or dependents covered by the Military Lending Act (MLA) may not pledge any vehicle as collateral. If you are covered by the MLA, you are not eligible for secured loans.Loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z such as college, university or vocational expense; for any business or commercial purpose; to purchase cryptocurrency assets, securities, derivatives or other speculative investments; or for gambling or illegal purposes.
Time to Fund Loans: Funding within one hour after loan closing through SpeedFunds® must be disbursed to a bank-issued debit card. Disbursement by check or ACH may take up to 1-2 business days after closing.
FAQs
What do you need to apply for a personal loan?
When applying for a personal loan, you’ll generally be asked to submit a completed application form as well as proof of identity, proof of income and personal information like your address and Social Security number.
What can a personal loan be used for?
Personal loans are versatile and can be used for just about any large expense including weddings, medical bills, vacations, emergency repairs and more. There are some prohibited uses like illegal activities.
Can you get a personal loan with a bad credit score?
Subscribe to the CNBC Select Newsletter!
The CNBC Select Recommends newsletter delivers practical money tips each week along with expert-picked financial product recommendations. Sign up here.
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 personal loan article 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.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
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.
