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Personal Loan Requirements: Explained for Beginners

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Personal loans come with a lot of flexibility in what they can be used for and the approval process is usually fast, making them a popular choice for many Americans. While they’re easier than a mortgage to qualify for, there are still important requirements you’ll need to meet.

In this article, we’ll explain the personal loan requirements that lenders look at, what supporting documentation you’ll need to provide and what to do if you don’t currently qualify for a personal loan.

Personal Loan Requirements Lenders Will Review

Most personal loans are unsecured, meaning the borrower doesn’t need to put up collateral to qualify. Because the lender isn’t getting an asset from the borrower, they’ll base their decision on whether or not to issue the loan solely on the borrower’s loan application.

Below are the most critical factors they’ll review as part of that application.

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Credit score

Your credit score is one of the most important factors lenders will review when deciding whether or not to issue you a personal loan. As part of the application process, your lender will perform a hard credit check to accurately determine your credit score.

Your payment history makes up a large component of your credit score and is especially important to lenders. They view what you’ve done in the past as a good indicator of what you may do in the future.

Different lenders have different minimum credit score requirements for personal loans. If your score is lower, you may still qualify but be charged higher interest rates on the loan.


Taking on a personal loan means taking on debt that you need to pay back. Lenders want to verify that you are gainfully employed and that you’re earning income that can be used to pay back the loan.

You can still qualify for a personal loan if you’re self-employed as long as you can prove that you’re earning income consistently.

Debt-to-income ratio

Lenders will compare how much you earn against the debts that you owe each month. This is known as the debt-to-income (DTI) ratio. Generally speaking, the lower your DTI ratio number, the better your standing in the eyes of potential lenders.

The exact DTI ratio you’ll need to qualify for a personal loan will vary from lender to lender, but generally, you’ll want a DTI that’s under 40% and some lenders may require even lower.


Collateral is only required when applying for a secured personal loan. For these loans, the lender will consider the asset the borrower is willing to put up as a part of their application.

Common assets include vehicles, property and objects of value like jewelry or art. If the borrower fails to pay back the loan, the lender has a right to claim the asset that was put up as collateral.

What Documents Do You Need To Apply for a Personal Loan?

One of the ways that lenders will verify the financial details that make up your loan application is through supporting documentation. Below is a list of the supporting document categories that may be required when applying for a personal loan.

Supporting documentation for a personal loan

Proof of identity

This could be a birth certificate, state ID, social security card or other form of ID. Your lender will likely require some proof that you are who you say you are.

Proof of address

Some lenders will also require proof of address. You can usually use a utility bill, a mortgage statement, a copy of your lease or a copy of your renters or homeowners insurance for this.

Employer and income verification

Your lender will most likely need proof of your employment and earnings. This can come via W-2s, pay stubs, bank statements or tax returns. Some lenders may also ask for your employer’s contact information.

Loan application

You’ll also need to fill out the loan application. This can usually be done online, although you may be able to apply in person depending on the lender you use.

Be sure to provide a lender with any supporting documentation that they ask for as quickly as possible to expedite how quickly they can process your application.

The sooner they approve your application, the sooner the funds can be transferred to you.

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How To Apply for a Personal Loan

Now that you know what’s required to qualify for a personal loan, here are the steps you need to take to apply.

  • Find lenders: The first thing you should do is compile a list of potential lenders you’d consider using. We recommend searching online as well as asking friends and family if they have any recommendations.
  • Compare interest rates and fees: Next, we suggest talking to the lenders on your list to get a sense of who you want to use. Make sure to look at the interest rates and lender fees that you’ll pay for each. The annual percentage rate (APR) is a figure that combines the interest rates and fees, and you can use that as a baseline metric when comparing lenders.
  • Gather supporting documentation: You’ll need to submit supporting documentation along with your application. Gather these documents ahead of time to streamline the process and save you some time.
  • Fill out an application: Once you’ve selected a lender and gathered your supporting documentation, you’re ready to submit an application. Once everything has been submitted, you should usually hear relatively quickly whether or not the loan has been approved. Some lenders can approve a loan in as little as one business day.

What If You Don’t Meet the Personal Loan Qualifications?

It can feel like a personal judgment when a loan application is denied. But the reality is that lenders base their decisions on impartial mathematics. If your application for a personal loan is denied, here are the steps you can take to improve your odds in the future.

Improve your credit score

If you take the necessary steps, you can usually improve your credit score within a few months. Since this is one of the biggest factors lenders will review, improving your score can make a big difference if you plan on reapplying for the loan.

Improving your credit score can also help you qualify for better interest rates and lower fees from lenders, so it can save you a lot of money in the long run.

Improve your DTI ratio

There are two primary ways to improve your DTI ratio: You can increase your income or you can lower your debt. Both of those things are easier said than done, but they can make a huge difference in your personal loan application.

Being disciplined with your spending habits is important no matter what your financial situation looks like. If you have a lot of debt, consider turning to proven strategies like the avalanche method to help you manage it.

Find a co-signer

A more immediate solution could be finding someone willing to cosign the loan with you. That person would be held responsible if you fail to repay the loan. But if they are in good financial standing, they could be the edge you need to tip the lender’s scales in your favor.

Final Thoughts on Personal Loan Requirements

Many lenders can show you what personal loans you prequalify for within seconds. Just answer a few questions and they’ll show you sample loan terms. Remember, your credit score and DTI ratio will be the most important factors in deciding whether or not you qualify.

Get Prequalified for Loans from $2,000 to $45,000

Rocket LoansSM offers personal loans from $2,000 – $45,000. From debt consolidation to unexpected expenses, we’ve got you covered.

Checking your options won’t affect your credit score.

The Short Version

  • Lenders will review your credit score, income and debt-to-income (DTI) ratio when applying for a personal loan
  • Supporting documentation will need to verify your identity, address, income and employer. You’ll also need to fill out an application for the loan
  • If you don’t qualify for a personal loan, you should focus on improving your credit score and DTI ratio. Then you can reapply after a few months
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