How To Get a Loan From the Bank in 5 Steps

If you need to ask for a loan from a bank, you can apply online or make an appointment to apply in person. It's best to check first whether or not you're eligible and that you have all the documents ready. Getting a loan from a bank may be best suited to those who are already customers with the bank and have good-to-excellent credit, though you may still qualify if other factors in your application are strong and help your odds of approval.

If you need to ask a bank for a personal loan, follow these steps below.

Key Takeaways

• Know what banks check before you apply, including your credit score, income stability, debt-to-income ratio and how you plan to use the funds. Most lenders want fair credit of at least 580 and a DTI under 36% to approve a personal loan.

• Avoid common application mistakes like skipping your credit report, requesting more than you can repay or submitting hard applications at several banks at once. Stick with lenders that offer soft-pull prequalification so you can compare rates without dinging your score.

• Shop around before committing by prequalifying with three or more banks, comparing APRs, fees and repayment terms side by side. If you get denied, ask the lender for the written reason, then try a credit union or work on your credit before reapplying.

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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.

The 5 Steps To Get a Bank Loan

1. Double-check your credit score. Many banks want to see a score of around 580, but higher credit scores obviously can help qualify you for a better rate.

2. Add debts and income. You'll have to share proof of income and other personal information. You can learn your rates without your credit taking a hit. Ideally want to see your debt under 36% of your income.

3. Compare offers from different banks. Also, 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. Make sure you can honor the repayment terms and only borrow what you know you can pay back.

4. Apply online or schedule an in-person meeting with a loan officer to discuss your options. Have your pay stubs, ID and Social Security number handy.

5. Once you get approved, sign to receive the funds. You may get access to the funds within minutes and up to a few days, depending on the bank.

What Banks Check Before Approving a Loan Application

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

3 Mistakes That Get a Loan Application Denied

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

1. Not Checking Your Credit Report

Don't skip checking your credit report. Errors can hurt your overall score. If you find inaccuracies on your credit report, contact the credit bureau to get it resolved.

2. Asking for Too Much Money

Don't ask for more than what you need — and can afford. Banks cap their loan amounts, so if you're asking for more than they're willing to lend, it's likely to be denied. Your odds of success are also low if you're asking for more than you can reasonably afford to repay.

3. Applying at Too Many Banks at Once

Don't send your loan applications everywhere. Applying for too many loans in a short time frame can hurt your credit score. Plus, lenders sometimes view multiple inquiries as a red flag, 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.

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 in Writing

Lenders must provide a written explanation why your loan was denied, usually within 30 days, per federal law. You can ask the bank for more information. That way, you can improve your application 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.

Pay Down Debt and 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 36% or lower.

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.

Do I need to already be a customer to get a loan from a bank?

Not every bank requires you to be a customer to get a personal loan. Each bank is different, so you should shop around to find the right one that fits your budget and needs.

Is a bank loan better than a credit union or online lender?

A bank loan isn't always better than a credit union or online lender. It might be, though, if you like being able to visit a branch for personalized service with a bank employee or you have relationship discounts if you're already a customer. Credit unions also might offer better rates and low-cost fees. Ultimately, though, you should check across different types of lenders to see if the loan terms and requirements make sense to you.

Key Terms

• Debt-to-income ratio (DTI): Your DTI compares your monthly debt payments to your gross monthly income. Lenders use it to judge whether you can handle a new loan payment.

• Credit score: A credit score is a number based on your credit history that helps lenders measure how risky it may be to lend you money.

• Collateral: Collateral is an asset you pledge to secure a loan. If you don’t repay, the lender may take that asset.

• Annual percentage rate (APR): Annual percentage rate includes the interest rate plus certain loan fees, giving you a fuller picture of a loan’s total yearly cost.

• Credit inquiry: A credit inquiry is a request to review your credit report, often to decide whether you qualify for a loan or other credit.

Sources:

• Consumer Financial Protection Bureau: What is a debt-to-income ratio?

• FICO®: FAQs About FICO® Scores in the US

• Consumer Financial Protection Bureau: Financial Terms Glossary

• Consumer Financial Protection Bureau: What is the difference between a loan interest rate and the APR?

• Consumer Financial Protection Bureau: What is a credit inquiry?

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