How to Apply for a Personal Loan

By Nicki Howell

  • Overview

    Personal loans allow individuals to consolidate debt into one payment at a fixed rate. These loans are unsecured, unlike a home mortgage or car loan, and most personal loans don't have a penalty for paying off the debt early. Unlike home equity loans or lines of credit, a personal loan doesn't typically have closing costs--which can save money. But before applying for a personal loan, it's important to gather the required paperwork and decide which financial institutions offer the best deals. Here's a guide to applying for a personal loan.
    • Step 1

      Gather the required paperwork. This includes up to 3 months of recent pay stubs, bank statements and 401(k) or retirement savings statements. Also, be prepared to provide proof of identification, such as a copy of your driver's license.
    • Step 2

      Check out online lenders such as E-Loan. Because these lenders don't have the expense of branches, they often have good rates on personal loans. They offer personal loans up to $100,000 (subject to qualifications), owning a home isn't required, and rates are as low as 5.99 percent depending on your credit history.


    • Step 3

      Check out your current financial institutions. If you have your checking, savings and a personal loan with a lender, it may reward you for your loyalty by offering reduced rates. If your lender doesn't offer relationship discounts, visit Bank Rate (see Resources), where you can compare the best rates on personal loans. Then, ask your lender to match the best rate.
    • Step 4

      Contact your local credit union about personal loans. Because these financial institutions are nonprofit, they return profits to members with lower rates. You will need to open a savings account with a $5 to $100 minimum deposit to start your membership. After your savings account is open, you can apply for a personal loan by providing proof of income and authorizing your credit report to be run.
    • Step 5

      Sign loan documents and wait for the funds to disburse. Depending on the financial institution, approval for your loan may be instant, or it can take up to a week. Upon receiving approval, you will be required to sign loan documents. If your loan is with a bank or credit union, these documents will be signed in the branch with a notary. If you choose an online financial institution, it the process will involve a mobile notary--which means you can sign loan documents in the comfort of your home. After signing documents, funds typically disburse in 2 to 7 business days.
    • Skill: Moderate
    • Ingredients:
    • Pay stubs (from the past 3 months)
    • Bank statements
    • 401(k) statement
    • Tip: If you apply for a personal line of credit with a few financial institutions, don't let them all pull a credit report. Have the first lender pull a credit report, ask for a copy, and share it with other lenders. Having your credit pulled by several makes it seem like you're applying for mass amounts of credit--which may negatively affect your credit score.
    • Warning:
    • Be aware of annual fees. Some personal loans have annual fees between $50 and $100 depending on the financial institutions. Find out whether a personal loan is assessed these fees before completing an application.

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