Learn How to Get a Personal Loan in 8 Steps

1. Compile the data

The last thing you or your lenders want is for you to take out a personal loan and then be unable to repay it. While lenders normally perform due diligence to ensure you have the ability to repay the debt, it’s a good idea to run your own figures to ensure everything works out.

Begin by calculating how much money you’ll require, keeping in mind that some lenders impose an origination fee, which is deducted from the loan proceeds. Make sure you borrow enough to cover your expenses after the cost.

To determine your monthly payment, use a personal loan calculator. This can be challenging if you don’t know what interest rates and payback terms lenders will provide, but you can play with the numbers to get an idea of how much the loan will cost you and determine if your budget can manage it.

Takeaway: Before applying for a personal loan, find out if the lender charges an origination fee and, if so, how much it is. Determine how much money you’ll need after fees, as well as a monthly payment you can comfortably afford.

2. Examine your credit score

Most lenders will do a credit check to verify your ability to repay your loan. While some internet lenders have begun to consider alternative credit data, they will normally consider your credit score The best personal loans normally require at least acceptable credit — typically between 580 and 669.

A credit score of 670 or above will give you the best chance of being approved with a competitive interest rate. AnnualCreditReport.com provides a free copy of your credit report.

Every 12 months, it will send you a free copy of your credit report from all three credit bureaus. Examine the report to check if there are any inaccuracies. If you discover any errors, contact the credit reporting agencies (Equifax, TransUnion, and Experian) to get them fixed.

If your credit score is low due to other factors, you may still be able to obtain a loan.

However, the interest rates and fees may be too high to make it worthwhile, so work on improving your credit before applying.

Takeaway: Knowing your credit score will tell you where you stand. The higher your credit score, the more likely you are to get approved for a loan and have a reduced interest rate.

Next steps: Examine your credit report and history. If your credit score is lower than the minimum and you don’t need a loan right now, work on raising it.