Taking out a personal loan can be a lifesaver when money is tight. Personal loans usually place few restrictions on how the money is spent, so you can use it to pay for an unexpected repair or cover household bills if you are short of cash. When you are in a pinch and need money fast, you may be wondering how long do personal loans take to process?
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Understanding the personal loan application process
The time to get a personal loan varies based on the lender. So, it’s essential to understand the steps you will go through to get a personal loan.
Many lenders let you prequalify for personal loans so you can get an idea of how much you can borrow and the rates you’ll pay. If you meet the basic qualifications, you can move on to the formal application process. While some lenders may offer same-day approval based on your applications, others may ask for additional documentation of your employment status, income and eligibility.
When you apply for a personal loan, you undergo a hard credit check so the lender can evaluate your creditworthiness. If the lender approves your application, it can take up to one week for the funds to be deposited into your account. However, some lenders could take over a week to send money to your bank account.
Personal loan funding timeframes
Lenders have different timelines when funding personal loans.
Online lenders
Online lenders may be the quickest way to get money when needed. Since you apply online, you don’t waste time visiting the lender in person. Plus, they may have less stringent credit score requirements than banks or credit unions.
Online lenders usually process applications and disburse funds within a few days. Some lenders may fund your personal loan the day you are approved.
Banks
Some banks let you apply for a personal loan online. However, the application process can be longer if the bank requires an in-person visit to apply.
Banks can take up to a week to process your loan application and remit funds to your account. However, if you are an existing customer, the bank could process your application and disburse funds faster.
Credit unions
You must be a credit union member to apply for a personal loan. Like banks, some credit unions accept personal loan applications online. If not, you need to apply in person. Since credit unions usually consider the borrower’s membership history, they may be more willing to approve applicants with lower credit scores. Credit unions can take up to a week to approve your application and disburse your money.
Other alternatives: Payday loans, pawn shop loans, and car title loans
Consider other personal loan alternatives if your credit score is low or you need cash immediately. While other options offer a quick way to get money when you’re in a bind, they come with risks.
Payday loans promise fast funds with no credit check. You typically pay back what you used from your next paycheck. However, payday loans typically charge steep fees, especially if you can’t pay back the money when it’s due.
For a pawnshop loan, you bring something of value to use as collateral. Like payday loans, there’s no credit check and you can get your money immediately. However, if you don’t repay the loan when it’s due, the pawnshop sells your collateral to recover their loss.
When you own your vehicle, you can take out a loan using your car’s title as collateral. You avoid credit checks and get your money typically within a day. A car title loan can be a quick and easy way to borrow money, but you could lose your vehicle if you don’t pay it back when due.
| Lender type | Typical approval and funding time |
| Online lenders | 1 to 3 days |
| Banks | 1 to 3 days or more |
| Credit unions | 1 to 3 days or more |
Factors that influence the processing time of a personal loan
Many factors affect the processing time of a personal loan application.
1. Loan type and amount
The amount of money you want to borrow can affect how quickly your application is processed. Lenders take on risk when loaning money. Borrowing a smaller amount of money could push your application through faster. With a larger sum, the lender may take extra time to review your application, verify your income, and evaluate whether you can afford the monthly payment.
2. Credit score and history
Lenders look to your credit score and history to ensure you will repay what you owe. As such, lenders routinely look at your record of managing past credit and on-time payments. The approval process may slow down if the lender requests additional documentation to support your loan application if you have delinquent payments or derogatory marks on your credit report.
3. Income and employment verifications
If your income isn’t high enough or you can’t prove consistent employment, the lender may request more information to process your application. You might be asked for paycheck stubs or tax returns, or the lender could expand their employment verification.
4. Internal process of the lending company
Each lender follows their own internal process when making personal loans. Some lenders take more time to review personal loan applications and supporting documents. Online lenders usually need less time to process and approve applications than banks and credit unions.
How to get a personal loan faster
If you plan to take out a personal loan, there are steps you can take to speed up the process.
Make sure your credit score is in good standing
Lenders consider your credit history when evaluating your personal loan application. The lender may charge you a higher interest rate when your credit score isn’t high enough. Or the lender may deny your application. So, before you apply, check your score to determine the likelihood of approval.
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Get prequalified
You can find out if you can get approved for a personal loan through pre-qualification. You can find out your potential interest rate and monthly payment. Since there is no hard credit check for you to prequalify, your score doesn’t take a hit.
Gather all necessary documents and information beforehand
Gather the necessary documents before you apply. Lenders usually ask for documents such as a driver’s license or government-issued identification, proof of income, Social Security number, and proof of where you live. Having key documents readily available helps you complete the application faster. Plus, it’s easier to supply copies to your lender if you know where these documents are.
Apply online
Applying online, if the lender allows it, can speed up the process. Avoiding the in-person visit will also save time.
Avoid applying for multiple loans at once
When reviewing your loan application, your credit score could drop when the lender does a hard credit pull. Submitting multiple loan applications could adversely affect your score.
Be honest and accurate in your loan application
The more time the lender needs to review your application, the longer it takes to get your money. Submitting inaccurate information slows down the process.
Ease Financial Stress with a Personal Loan
A personal loan can help you get the money you need to pay for an emergency expense, consolidate debt or make repairs around your home. Getting a personal loan can take time, but with a little planning, you can boost your chances of securing one quickly.
FAQ
Does my credit score affect how long it takes to process a personal loan?
Low credit scores can delay your personal loan application. Lenders may request additional information or documents when evaluating your credit history.
Can a cosigner help speed up the processing time for a personal loan application?
A cosigner can give lenders greater assurance they will be repaid. Adding a cosigner with a good credit score and history to your personal loan application can speed up the processing time.
Is there a difference in processing times for secured versus unsecured personal loans?
With a secured personal loan, the lender holds something of value as a guarantee that you’ll repay the funds. Since the lender is less likely to lose their money with a secured personal loan, they may process your application faster.
