How to Qualify for a Personal Loan (Without Putting Up Collateral)

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Americans held $117 billion in personal loans at the end of 2017, according to TransUnion. But this high balance doesn’t mean lenders give personal loans to just anyone.

Before lending an unsecured personal loan — or one that doesn’t require collateral — companies need reassurance about your ability to pay it back in full. To determine this, they look at factors such as your credit score and debt-to-income ratio.

If you’re interested in borrowing an personal loan, here are seven steps to take to ensure your application will be approved.

1. Check your credit score

Your credit score is a major factor when qualifying for an unsecured personal loan. Although lenders typically don’t disclose what score they look for, most prefer good or excellent credit.

Before applying for an unsecured personal loan, make sure you know what your credit score is. You can check it out for free with services such as Credit Karma.

Some credit card companies also offer your FICO score for free. By knowing your score, you’ll have a better idea of your chances of qualifying for a personal loan.

2. Order a copy of your credit report

Although your credit score represents your creditworthiness, it doesn’t show you the full picture. For a deeper dive into your financial past, order a free copy of your credit report from AnnualCreditReport.com.

You can get a free report once a year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. It will show any outstanding debt, along with your history of repayment and other factors that affect your credit score.

Take a close look at your credit report so you can see areas where you’re on track, as well as areas where you can take steps to improve. Also, be on the lookout for any reporting mistakes.

“Get a copy of your credit report and review it for any errors,” suggested David Bakke, a personal finance expert at Money Crashers. “Fixing those will improve your score as well.”

If you find errors, you can submit a written dispute to the credit reporting company.

3. Pay your bills on time

If your credit score is low, you could try to improve it by paying your bills on time.

On-time payments will help increase your credit score and, as a result, boost your chances of getting an unsecured personal loan.

“One of the main qualifiers for unsecured personal loans is your credit score, so folks should get to work on beefing that up before applying,” said Bakke.

Even if your score is high enough to qualify for a personal loan, increasing it also could snag you lower interest rates.

“If you qualify for [a personal loan], but your credit score is low, you’ll pay more in interest — another good reason to improve it,” Bakke added.

4. Pay down your debt

Your debt-to-income ratio is another major factor affecting your credit score. If you have a high ratio, paying down your debt could help boost your score.

Come up with a plan to conquer your debt, whether by making extra payments or increasing your income by taking on a side hustle.

You also might open a new credit card to reduce your ratio, but be careful to not spend more than what you can afford just because you have access to more credit.

After all, this will increase your debt-to-income ratio again, hurt your credit score, and make it difficult to get an unsecured personal loan.

Also, keep in mind that opening too many new lines of credit in a short time could hurt your score.

5. Show you have a stable income

“A lender is going to look at other factors such as income and employment history,” said Ryan Skidmore of Lift Credit. “They want to ensure that you are getting enough money to make on-time payments.”

While lenders look at your credit score to understand your financial past, they typically also consider your income as a sign of your financial future.

Proof of income, along with a stable employment history, shows the lender that you’ll be able to manage repayment over the life of your loan. Unstable employment, on the other hand, could hurt your chances of qualifying.

According to Skidmore, a lender will ask for your salary data and might even call your employer to verify your information.

If you don’t have much money coming in, take steps to improve your employment situation before applying for an unsecured personal loan.

6. Submit a joint application with a creditworthy cosigner

Besides improving your credit score and boosting your income, another step you can take to get an unsecured personal loan is applying with a creditworthy cosigner.

If your credentials are weak, your cosigner’s credit score and income could make up for them.

“Many lenders are more than willing to give loans to someone with bad credit if someone with a good credit score is willing to cosign the loan,” said Skidmore. “A cosigner commits to being responsible to pay the loan if the borrower is unable to do so.”

Skidmore suggests asking a relative or close friend to act as your cosigner. Of course, you and your cosigner must be comfortable sharing debt. Both of you will be equally responsible for repaying the loan in case one person can’t pay.

7. Find the right lender

Although lenders look at similar factors when considering you for a loan — credit score, income, history of debt repayment — each company sets its own underwriting requirements.

You might have a better chance of approval if you have a relationship with the lender, whether it’s a bank or local credit union.

“Start with your current bank or credit union, as they might offer you a better rate than a lender with whom you have no relationship,” said Bakke. “But you should still shop your loan to at least three lenders overall to ensure you’re getting the best rate.”

Peer-to-peer lenders, such as Prosper and LendingClub, are other options. Make sure you’re going with a reputable lender offering low rates.

Even if you have no trouble getting approved, it’s smart to shop around and compare personal loan offers. That way, you can find the best offer for your financial situation, as well as a personal loan with the lowest rate.

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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. 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 to help you understand what you are buying. Be sure to consult with 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.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

RATES (APR)loan amount
5.99% – 17.88%1 $5,000 to $100,000
5.69% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
15.49% – 35.99% $2,000 to $25,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 17.88% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 4, 2019 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 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 3.08% 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. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. 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 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

** 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.