How to Get Prequalified for a Personal Loan (and Why You Should)

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

two people exchanging money at a desk, loan with forms

How’s it possible that a lender such as Upstart can approve or deny you for a personal loan within minutes?

Well, your online application might prequalify you for a personal loan — but it won’t guarantee you’ll get the loan.

However, preapproval is an important part of the personal loan application process. Here’s why and how to achieve it.

Why get preapproved for a personal loan?

Prequalifying for a personal loan — also known as preapproval — allows you to check your potential loan terms without harming your credit. By providing basic information about your finances and desired loan, you can receive — and then accept or decline — quotes from lenders.

It’s wise to seek preapproval from multiple lenders. This way, you can compare APRs, amounts, and repayment term lengths to find the best loan for you.

On the other side of the table, lenders get a sneak peek at your creditworthiness. If you have an excellent credit score, for example, the lender might have no problem letting you in through the door. If your score is low, however, it might use your application for preapproval to explain alternative options, such as bringing on a cosigner to qualify.

3 steps to prequalify for a personal loan

Like in the case of private student loans, the terms on personal loans are based primarily on your (or your cosigner’s) credit score and debt-to-income ratio. Many of the vetted personal loan companies in our marketplace, for example, require you to have a credit score of at least 600.

Once you’ve assessed whether your numbers are good enough for a personal loan, take these three steps to prequalify.

1. Figure out your monthly payment

Most preapproval applications will ask about your desired borrowing amount. After all, a lender might not be willing to lend you $30,000 if it determines that you could repay only $20,000.

Before you start shopping around and completing preapproval applications, you should figure out how much you can afford to repay each month.

Later, when lenders start handing you APRs, plug them into our personal loan calculator to ensure your desired monthly payment is affordable. The calculator also can show you how much interest you’ll owe over time.

Say you want to borrow $10,000 and can afford monthly payments of $300, for example. If a lender quotes you an interest rate of 8.00% and a three-year repayment term, you’ll find that your monthly payment would be $313 and you’d pay a total of $1,281 in interest charges.

2. Identify lenders that meet your needs

Aside from knowing what you want out of your loan, you also should consider what you need from your lender. Make a list of your priorities, which could include:

  • Disbursement within 48 hours (in case you need the funds quickly)
  • No prepayment penalties (in case you pay off the loan early)
  • Unemployment protection during repayment (in case you lose your job)

Once your list is complete, find a variety of lenders that meet your needs. Try to have a mix of traditional banks, credit unions, and online companies. You might start your search by consulting our list of best personal loan companies and comparing the features they offer.

3. Complete the preapproval applications

The easy part of the loan process is the application itself. Most lenders will have a single-page form requesting the following from you:

  • Personal information, such as your address, Social Security number, and education history
  • Specific financial details, such as your income, monthly house payment or rent, and bank account balance

To complete these forms in the two- or three-minute spans that lenders advertise, have your information handy.

Some lenders, including SoFi and Earnest, will ask you to take the additional step of creating an account on their websites before finishing your preapproval application.

Getting approved … or not

After you submit your application, the lender performs a soft credit check to assess your creditworthiness. Unlike the hard credit check that takes place later in the loan application process, this initial review won’t harm your credit score.

Applications that asked you to estimate your credit score might provide you with an immediate approval or denial. Often, you’ll be contacted via email or phone once your initial application has been evaluated.

If you’re approved, the lender might offer specific terms, such as your interest rate and loan amount. The lender also might let you choose from a few repayment options.

If your application is denied, the lender could get in touch to tell you about how to strengthen your application, potentially by applying with a cosigner or co-borrower. You also could receive an adverse action notice, which explains why your loan was denied.

Go from prequalified to qualified

The beauty of trying to prequalify for a personal loan is there are no strings attached. You go through the minor hassle of completing an application, but then you get to review loan terms without putting your credit at risk.

If you decide to not take a personal loan after applying, you don’t have to.

You likely have reached this point because you intend to borrow money. If you’re preapproved and want to move forward with the process, you’ll be asked to provide more information about your financial situation. At that point, you’ll be subject to a hard credit pull, which will be noted on your credit report.

Once your formal application is finished, your lender can present its actual loan offer.

If you failed to prequalify, head back to the drawing board. You might consider ways to improve your credit score or strategies to increase your income. Then you can prequalify — and ultimately, qualify — for the right personal loan for you.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.199% APR to 15.365% APR (with AutoPay). Variable rates from 6.145% APR to 14.685% APR (with AutoPay). SoFi rate ranges are current as of June 15, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.145% APR assumes current 1-month LIBOR rate of 1.97% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply:SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.15% – 15.37%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.