When you’re looking for a personal loan, you want to know if there’s a chance you’ll qualify. We’re all inundated by ads and offers. How do we know what we could really get in terms of a personal loan?
One way to get a better idea of where you stand is to compare loan offers based on preapproval. But does preapproval for a personal loan affect your credit score? The answer is: It ultimately depends on the lender’s application process.
Here’s what you need to know as you shop around for personal loans.
What is a loan preapproval?
Basically, preapproval indicates that you meet basic requirements, and it sets forth how much you can borrow, and the rates for which you qualify. With a preapproval, you can be reasonably confident that you’re eligible to borrow up to a certain amount of money. This is different from being prequalified, which makes use of limited information.
With a prequalification, you meet certain standards for an offer, but the specifics won’t be set until you provide more detailed information about your credit and income situation. A preapproval goes a step beyond the prequalification and uses more specific information to give you an exact amount to borrow.
As part of the process, you might also need to indicate whether you’ll offer collateral for your loan. Many lenders offer unsecured personal loans, though, so you might not have to worry about providing some sort of security for the loan.
Your preapproval isn’t a set guarantee that you’ll ultimately get the loan, but it’s a fairly good indication of what to expect as you move forward.
How a preapproval may affect your credit score
So, does preapproval for a personal loan affect your credit score? Well, it depends on the situation, and the type of inquiry involved.
There are two main types of inquiries, or “pulls,” on your credit report:
- Soft pull: The lender checks your credit information to determine if you meet basic qualifications for a loan product. This does not impact your credit score. Many online personal loan lenders will perform a soft credit check to determine preapproval.
- Hard pull: A hard pull means you’ve applied for a loan, resulting in an impact to your score. A hard pull occurs before a soft pull with lenders — commonly banks and credit unions — that don’t offer preapprovals.
If you apply for a loan after being preapproved, a hard credit check would be done at that point. Even though a hard pull can lower your credit score, it’s usually a fairly small impact overall. How much of an impact a hard credit inquiry has depends on your current credit situation and the type of loan for which you’re applying.
Additionally, credit scoring models often take into account the time period. So, if you’re comparison shopping for loans, a bunch of hard inquiries for the same type of loan in a short period — usually 14 days — are likely to be lumped together and only “count” as a single inquiry, limiting the effect on your credit score.
|Lender||Soft Pull or Hard Pull?|
|PenFed Credit Union||Hard|
|First Tech Federal Credit Union||Hard|
|Alliant Credit Union||Hard|
The above information was compiled in February 2019 from lender websites by Student Loan Hero.
What you need for preapproval on a personal loan
In many cases, getting a preapproval is fairly fast and easy — as long as you have the required information readily available. In many cases, you’re expected to provide the following:
- How much you want to borrow
- Purpose of the personal loan
- Annual income
- Employment information
Some lenders, like Upstart, also ask for details about your education level, source of income, and information about your checking and savings accounts. You might even be asked to share whether you’ll repay the loan via recurring payments or mail-in checks.
For the most part, getting a preapproval on a personal loan via the internet is pretty quick and easy, taking only a few minutes. Moving forward, though, you’ll eventually have to provide your Social Security number and may even need to offer other documentation about your assets and salary.
Each lender has slightly different requirements, so it’s important to understand what you’re expected to provide — especially if you seek a preapproval in person from a brick-and-mortar financial institution. Call ahead to find out what documentation they require before you meet with a loan officer.
Before you apply, consider checking personal loan credit score requirements from different lenders. Knowing your score ahead of time can give you an idea of whether you’re likely to be approved.
Checking your own credit won’t have an impact on your score. You can check your own credit score for free at LendingTree, Student Loan Hero’s parent company.
Where to find personal loans
It’s possible to find personal loans in a number of places. Many lenders offer applications online, and you can find a list of options for personal loans from lenders. This provides a quick look at several different lenders with fast and easy approval processes. But if your credit score is less than stellar, you may consider these bad-credit lenders instead.
You can also look for personal loans at brick-and-mortar lenders. Many banks and credit unions offer loans for amounts ranging from $1,000 to $50,000.
No matter what you’re looking for, be sure to do your research, compare loan offers from multiple lenders to ensure you get the best possible deal on a personal loan.
This article contains links to LendingTree, our parent company.
Interested in a personal loan?Here are the top personal loan lenders of 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.74% – 16.99%1||$5,000 - $100,000|
|7.54% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|