What Is Personal Loan Underwriting?

Lenders use the personal loan underwriting process to assess your creditworthiness and decide whether or not to approve you for a loan. Typically, lenders consider factors such as your credit score, income, and payment history when making this decision.

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What Happens During the Personal Loan Underwriting Process?

If you plan to get a personal loan, the underwriting process involves several steps. First you'll submit an application, then the lender will:

• Check your credit history: Lenders run a hard credit check to evaluate your creditworthiness. Typically, lenders prefer to work with borrowers who have a higher credit score. 

• Verify your income: Lenders often review your pay stubs, bank account statements, or tax returns to verify your self-reported income. Generally, lenders want to see a reliable income stream that’s sufficient to comfortably cover the loan payment. 

• Consider your debt-to-income ratio: Most lenders consider any other debts you have when taking a look at your debt-to-income (DTI) ratio. If you have too much other debt, a lender might not want to take the risk of lending you more money. 

• Evaluate collateral: If you’re pursuing a secured loan, the lender will evaluate the particular asset you’re planning to put up as collateral. Typically, secured loans take longer to process due to the collateral assessment. 

Although the exact timeline for each step varies, lenders often complete the underwriting process in a few days. In some cases, you might receive an underwriting decision within one business day. 

After the lender approves your loan, you’ll receive a copy of the loan agreement to review. If you’re comfortable with the loan terms, you can sign the documents. From there, you’ll receive the loan funds and be expected to start making payments. 

How To Prepare For a Personal Loan Underwriting

If you want to take out a personal loan, preparing your finances ahead of time can give you the best chance of approval. Here are some strategies to consider:

• Check your credit score: Start with a quick look at your credit score. If it’s on the low end, consider improving it before applying for a loan. 

• Boost your credit score: A higher credit score gives you better approval odds. Some ways to potentially increase your credit score include sticking to on-time loan payments and paying down revolving credit accounts. 

• Gather your documents: Most lenders will want to see documentation of your financial situation. As a starting point, gather your W-2, tax return, pay stubs and bank account statements. 

• Don’t apply for other loans: In the lead-up to your personal loan application, avoid applying for other loan types. 

After you apply, the loan underwriter might have follow-up questions for you. Do your best to respond quickly and answer honestly to speed the process along. 

FAQs

What does a personal loan underwriter do?

A personal loan underwriter evaluates your financial situation and creditworthiness as part of a process to determine whether or not to approve a loan.

Why am I getting calls from personal loan underwriting?

If you applied for a loan, you might be getting a legitimate call from a personal loan underwriter for more information. But if you didn’t apply for a loan, receiving a call from a personal loan underwriter is likely a scam. If the call is from a scammer, don’t respond in any way. 

How to stop underwriter calls?

If you continuously get calls from underwriters about loans you didn’t apply for, consider adding your name and number to the National Do Not Call Registry. This will likely stop calls from legitimate companies, but it might not dissuade scammers. 

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