How To Ask for a Loan From a Bank

If you need a loan, you can apply online or make an appointment to apply in person. If you need to ask a bank for a personal loan, these are the steps you'll need to follow.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

1. Apply online or schedule an in-person meeting with a loan officer to discuss your options. Many banks will allow you to prequalify after a soft credit pull. You'll have to share proof of income and other personal information, but you can learn your rates without your credit taking a hit.

2. Have the exact figure you need ready. The application will ask you how much money you need and what you intend to use the money for. This is because some expenses aren't allowed in the loan's terms. For example, some personal loans can't be used to pay for education expenses.

3. Understand your budget for repayment. Make sure you can honor the repayment terms and only borrow what you know you can pay back.

4. Shop around before you submit an application. Get prequalified by several lenders before you officially apply for the loan. This will make sure you get the best terms possible.

What Banks Look at Before Giving You a Loan

Understanding how a bank assesses your loan application can increase your odds of success. Here's how bank loans work.

Credit Score and Credit History

Most banks require at least fair credit — scores between 580 and 660 — for personal loans, while very-good-to-excellent credit scores of 740 or higher can up your approval odds and get you more favorable loan terms.

Your Income and Job Stability

Some banks have hard income requirements for personal loans. For instance, you might need a minimum individual or household annual income of $25,000. Others will look for a steady stream of income, consistent employment and earnings that justify the requested loan amount.

You'll have to provide recent pay stubs, W-2s, tax returns and other employment verification as part of your loan application.

Existing Debts

Even applicants with good credit can face rejection if their debt-to-income (DTI) ratio is too high. DTI measures what you owe creditors against your gross monthly income. Banks prefer a DTI of at least 36%, but the lower, the better.

Loan Purpose

A bank will ask what you plan to use the loan for, and it may prohibit specific use cases. Obviously, you can't use the personal loan to make illegal purchases. Beyond that, banks commonly restrict its use for college tuition, student loans, housing down payments and investments.

Collateral

If your financial profile is spotty or you're applying for a large loan, lenders might require collateral — that is, a personal asset you offer to secure the loan. Common types of collateral include vehicles, cash deposits, precious metals or collectibles.

Common Mistakes To Avoid When Asking for a Loan

These common mistakes can lower your approval odds or lead to unfavorable loan terms.

Not Checking Your Credit Report

The information on your credit report is used to make up your credit score. Errors can hurt your overall score. If you find inaccuracies on your credit report, contact the credit bureau to get it resolved.

Asking for Too Much Money

Banks cap their loan amounts, so if you're asking for more than they're willing to lend, it'll likely to be denied. Your odds of success are also low if you're asking for more than you reasonably afford to repay.

Applying at Too Many Banks at Once

Loan applications can generate a hard inquiry on your credit report, and too many in a short time frame can hurt your credit score. Plus, lenders sometimes view multiple inquiries as a red flag in isolation, as they suggest you're overextending yourself or looking to finance items you can't repay.

When you're shopping for lenders, make sure they're only doing soft pulls on your credit so you can make an informed decision without hurting your credit score.

Ignoring Loan Terms and the Fine Print

Ensure you understand when payments begin, the total interest you'll pay over the loan's life, and whether the loan incurs additional fees or prepayment penalties.

Look for default clauses that explain what the bank will do if your loan becomes delinquent.

Comparing Loan Options From Different Banks

When comparing offers across banks, consider key loan terms, including annual percentage rates (APRs), repayment terms, fees and penalties and your total monthly payment. The chart below compares some of the best banks for personal loans.

What To Do If the Bank Says No

Here's how to get a personal loan if a bank denies your application.

Ask Why You Were Denied

Federal law requires a lender to provide a written explanation of why they denied your loan, usually within 30 days. You can ask a bank for more information upfront, though. That way, you can take steps to improve your applicant profile and better your odds of getting financing in the short or long term.

Try a Different Bank or Credit Union

Financial institutions don't all use the same loan criteria or underwriting standards, so you could get approved if you apply at one known to work with your financial profile. Some credit unions have more flexible lending standards for their members, for instance. Take a look at personal loan offers at these top credit unions.

Improve Your Credit Score

Although this can take months, taking steps to pay off other debts and building a positive payment history can make your life easier in the long run.

FAQs

How much income do I need to qualify for a loan?

Loan income requirements vary by company, lender type, and loan amount. While some lenders have minimum income requirements, others will consider whether your income and current financial obligations can comfortably cover the new monthly payment. Banks often require a debt-to-income ratio of at least 36%.

Can I get a bank loan with bad credit?

You can get a bank loan with bad credit, but you'll likely receive subpar interest rates and terms. You might also need to secure the loan with collateral or have a co-signer to get the financing.

How long does it take to get approved?

Traditional banks typically take between one and seven business days to approve and disburse personal loan funds. Some banks will move more quickly if you already have a pre-existing relationship with them.

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