How To Get a Loan in 5 Simple Steps

To get a loan, check your credit and budget, decide how much you can afford, compare banks, credit unions and online lenders, prequalify when available, then submit a full application. 

Before you apply for a personal loan, use a credit report tool, debt-to-income calculator and loan payment calculator to understand your position. Gather proof of identity, income and address so you can review offers without unnecessary delays. Personal loan requirements, rates, fees and approval decisions vary by lender and loan type.

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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.

How To Get a Personal Loan in 5 Steps

Here's the quick version before you dig in.

1. Check your credit score to see where you stand.

2. Figure out how much you need to borrow and what you can afford to pay back.

3. Shop and compare lenders, including banks, credit unions and online lenders.

4. Prequalify with a soft credit check to preview rates without hurting your score.

5. Submit a full application, review the loan offer and accept the funds.

1. Review Your Credit History

Three of the most important factors that can determine the outcome of your getting approved for a loan are:

• Your credit history

• Your ability to repay the loan

• How much you have in personal assets

Review your credit reports before applying so you can correct errors and understand what lenders may see. Your credit history can affect approval, loan amount, APR and repayment terms, but there is no universal minimum score for every personal loan. A stronger credit profile may give you more options or lower rates. 

To review your credit history, visit AnnualCreditReport.com to get a free report each week from each of the three big credit reporting agencies: Experian, Equifax and TransUnion. Check your reports for mistakes and address them immediately. Here’s a guide to disputing information on your credit reports.

What Is Debt-to-Income Ratio?

Your debt-to-income ratio (DTI) is the share of your monthly income that goes toward paying debts. Lenders use it to decide if you can handle another monthly payment.

To calculate it, divide your total monthly debt payments by your gross monthly income, then multiply by 100. Most lenders want to see a DTI of 36% or lower, though some approve borrowers with a DTI up to 43% or 50% with strong credit.

2. Determine Your Loan Type

Here's what a typical personal loan looks like today.

• Loan amounts: Most lenders offer $1,000 to $50,000, with some going up to $100,000 for strong credit profiles.

• Annual percentage rate (APR) range: As of the fourth quarter of 2026, personal loan APRs range from about 7% to 36%, based on your credit score and lender.

• Repayment terms: Terms usually last two to seven years, with 36 and 60 months being the most common.

• Average balance: The average unsecured personal loan balance in the U.S. sits around $11,700, according to recent TransUnion data.

Many types of personal loans exist, so first decide which type you need.

Secured vs. Unsecured

Loans come in two forms: secured and unsecured. Secured loans require you to put up collateral, such as a home or car, so if you don't repay the loan, the lender can recoup the money by selling it. Auto and mortgage loans are almost always secured loans.

An unsecured loan doesn't require collateral, which means that if you don't pay the loan, the lender can't seize your property to recover the money. In general, student, personal and credit card loans are unsecured. There are still consequences for not paying an unsecured loan, including negative marks on your credit report, which can affect your ability to get financing in the future.

What Do You Need a Loan For?

When you apply, the application will ask how you intend to spend the money. That's because loan terms often include rules about what you can use the money for. The different types of loans include:

• Auto loans: Designed for buying new or used vehicles.

• Personal loans: These can be used to consolidate credit card debt or fund big purchases. Some lenders will not allow you to use personal loans to buy a car or pay for education.

• Small business loans: If you're an entrepreneur and you want to know how to get a business loan, look into a small business loan for capital.

• Student education loans: You can get federal or private student loans to help cover higher-education costs.

• Mortgage loans: Home loans enable consumers to buy homes and pay them off over several years.

3. Find the Right Lender: Banks vs. Credit Unions vs. Online Lenders 

Each type of lender has trade-offs. Here's how they stack up.

• Banks: Best for borrowers with strong credit scores of 700 or higher. Funding can take three to seven business days. Rates are competitive if you already have a relationship with the bank.

• Credit unions: Often the most flexible on credit requirements, with some approving scores in the low 600s. Rates are capped at 18% by federal law for federal credit unions. Funding usually takes one to seven business days.

• Online lenders: The fastest option, with many funding loans the same day or within one to three business days. Credit requirements vary widely, and some lenders work with scores as low as 580. Rates can be higher for lower credit tiers.

Choosing the right lender means finding the one that best fits your specific situation. For example, if you're a credit union member, it's smart to check your options there first. Credit unions are nonprofit organizations and typically offer members lower loan rates. If you're not a credit union member but want to keep things local, you might choose a community bank loan over a national bank loan.

You can apply for a personal loan online today. Many companies offer quick, easy, online applications with short waiting periods. Peer-to-peer lending sites are another option — you don't have to use a financial institution with these types of loans. Instead, borrowers are matched with individual lenders. If you're buying a car, you'll usually want to choose a direct loan over a dealership loan; dealer loans are best for bad credit loans.

If you prefer a traditional lender, learn how to get a loan from a bank, including what banks may review and how to compare offers.

👉 Best Personal Loans

4. Prequalify and Compare Loan Rates and Terms

According to Federal Reserve data from August 2026, the average APR on a 24-month personal loan is 11.90%. TransUnion reported that unsecured personal loan balances in the U.S. hit a record $276 billion in late 2025, showing steady demand across credit tiers.

With excellent credit, you should be able to get great rates and terms on anything you need. Although it's still possible to get a loan if your credit is fair or bad, it can be more difficult to get approved and the rates will be higher.

Shop around for the type of loan you need and compare your options. Research lenders thoroughly before you apply for a loan. When you're doing your research, consider:

• How much you are borrowing: Don't try to borrow more than you can pay back. Use a loan calculator to estimate how much you're likely to get. Knowing how much you'll qualify for can help when you're talking to lenders.

• The loan's term length: For some types of loans, opting for a longer repayment period may lower your monthly payments. Remember that a longer-term loan will likely mean you'll pay more interest over the life of the loan.

• Interest rate: The annual percentage rate is the key to the total cost of your loan. Even though rate differences might be measured in tenths or hundreds of a percent, a high APR can mean you'll pay more interest over the long term and have higher monthly payments.

What Is an Origination Fee?

An origination fee is a one-time charge the lender takes for processing your loan. It usually runs 1% to 10% of the loan amount and is often deducted from your loan before the funds hit your bank account.

Here's what that looks like in practice. If you borrow $10,000 with a 5% origination fee, you'll receive $9,500 — but you still owe interest on the full $10,000.

5. Apply for Loans Selectively

Although you can apply for several loans at once, doing so could negatively impact your credit score. Whenever you apply for a loan, the company conducts a credit check, which means they review your credit report to see if you're a reliable borrower. When a company does this, it's called a hard inquiry, which shows up on your report as evidence that the company is deciding whether to lend you money.

Hard inquiries can ding your credit report and lower your credit score. Too many hard inquiries can make it look like you're scrambling for money, which is the last thing a lender wants to see.

Soft Credit Check vs. Hard Credit Inquiry

Not every credit check hurts your score. Knowing the difference helps you shop smart.

• Soft credit check: Used during prequalification to preview your rate. It does not affect your credit score and only you can see it on your report.

• Hard credit inquiry: Happens when you submit a full loan application. It usually lowers your score by fewer than five points and stays on your credit report for two years, though it stops affecting your FICO score after about a year.

Tools That Can Help You Get a Personal Loan

A few tools can help you prepare before a lender checks your credit:

• Credit report tool: Review your credit reports for inaccurate accounts, late payments or identity-theft warning signs. Dispute errors before applying.

• Debt-to-income calculator: Divide your monthly debt payments by your gross monthly income to estimate how much room you have for a new payment.

• Loan payment calculator: Enter the loan amount, APR and term to estimate the monthly payment and total interest. Test a shorter and longer term to see the cost trade-off.

• Prequalification tool: Shows an estimated rate, loan amount and payment using information you provide. It often uses a soft inquiry, but confirm the lender’s process before proceeding.

• Credit score tracker: Helps you monitor your score and understand which lender options may fit. A tracker is an estimate or educational tool, not a loan-approval decision.

Use the results to set a borrowing limit, compare offers and decide whether the payment fits your budget. No calculator or prequalification tool guarantees approval or final terms.

Documents You Need To Apply for a Personal Loan

A lender may ask for:

• Government-issued photo identification

• A Social Security number or, if accepted by the lender, an Individual Taxpayer Identification Number

• Proof of income, such as pay stubs, tax forms, benefit statements or bank statements

• Proof of address

• Employment or business information

• Bank account details for funding and payments

The documents depend on the lender, loan type and application. Check the lender’s requirements before applying so you do not submit a hard application that is unlikely to fit.

Key Terms

• Prequalification: An estimate of possible rates and terms, often based on a soft credit inquiry.

• Hard inquiry: A credit check connected to a full application that may temporarily affect your score.

• Soft inquiry: A credit check that does not affect your score and may be used for prequalification.

• Debt-to-income ratio (DTI): Your monthly debt payments divided by your gross monthly income.

• Annual percentage rate (APR): The yearly cost of borrowing, including interest and certain fees.

• Origination fee: A charge some lenders deduct from the loan proceeds for processing the loan.

• Underwriting: The lender’s review of your credit, income, debts and documents before making a final decision.

Sources

• Consumer Financial Protection Bureau: What is a personal installment loan?

• Consumer Financial Protection Bureau: What kind of credit inquiry has no effect on my credit score?

• Consumer Financial Protection Bureau: Credit reports and scores

• Federal Trade Commission: What To Know About Advance-Fee Loans

• AnnualCreditReport.com: Get your free credit reports

Parts of this article were created with AI assistance. Our editors reviewed, fact-checked and edited the final version.

Emily Gadd, CCC™, contributed to editing this article.

Photo credit: Pekic / Getty Images