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

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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.

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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.

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 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 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 6.275% APR assumes current 1-month LIBOR rate of 2.10% 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

  • 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.
  1. 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.
  2. 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

  • 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.
  1. 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.
  2. 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
6.28% – 14.87%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.