Sometimes, despite your best intentions, you need money. Maybe you’ve decided to consolidate your credit card debt into one monthly payment. Maybe you’re paying education expenses. Maybe you’ve been hit by a sky-high medical bill. (Fifty-seven percent of American adults were surprised by a medical bill they thought their insurance would cover, according to research from the University of Chicago.)
Whatever it is, you have a financial need — and a personal loan might be the way to fill it. With a personal loan, you can typically borrow as much as $50,000. Loans of this type are considered unsecured, which means there’s nothing being used as collateral. (For instance, when you take out a mortgage, the collateral is your home.)
3 eligibility requirements for a personal loan
Qualifying for a personal loan takes the right combination of factors, from your credit score to your income and debt levels. Here’s what you need.
Your credit score is a number that represents your creditworthiness — or how good you are at handling credit. If you pay your bills on time and keep your credit card balances down, your score will be higher than someone who has defaulted on a few loans.
Your credit score has a great deal of influence on whether a lender will offer you a personal loan — and what kind of interest rate you’ll receive. Rates through Student Loan Hero’s personal loan marketplace range from 4.99% to 199.00%, so a good credit score can make a huge difference.
Although it varies by lender, many companies require a FICO Score of at least 600 before it’ll offer you a loan. Some require a minimum score of 680. On the FICO scale, a score of 580 to 669 is considered “fair,” and anything below that is considered very poor credit.
Lenders also want to be certain that you’re making enough money to pay back the loan you’re requesting. The higher your income, the more you can borrow. If you’re hoping to borrow $20,000 but you’re a student with no income, that’s a tough sell.
Reasonable level of debt
Lenders also look at what other debt you’ve got on your plate, from credit cards to student loans to a mortgage. Maybe your income is sufficient but you’ve got so much other debt that you’ll struggle to make another payment each month. If your budget is already stretched, you won’t look like a good candidate for a personal loan.
What to do when you don’t qualify for a personal loan
If you’re not eligible for a personal loan, you’re not out of luck. And you’re in good company — more than a third of American adults up to the age of 49 have a credit score below 621. But even with less-than-stellar credit, there are still ways to access the market, depending on your situation. Here are some strategies.
Consider lenders with low credit requirements. Some lenders require a minimum credit score of only 600 – LendingPoint, Avant and LendingClub, for example. Make sure you compare interest rates among offers because credit-poor borrowers may get very high rates.
Check your local bank and credit union. Credit unions often have more flexible qualifications for personal loans than other lenders. And if you’re a customer at a local bank, they may be willing to extend a line of credit or loan based on your financial history with it.
Secure the loan. Although most personal loans are unsecured, you might land a loan if you offer to secure it by putting up collateral, such as your car or house. A home equity line of credit, for instance, allows you to borrow against the value of your home. The risk, of course, is that if you default on the loan, you’ll lose your collateral, so consider this option carefully.
Apply with a cosigner. Is there someone in your life with good credit who would cosign the personal loan with you? It means that you apply as a unit — you benefit from their good credit history and income/debt picture. But if you default on the loan, they’ll be responsible for repaying it. You’ll need a lender that allows this since not all companies permit joint applications or cosigners.
Repair your credit situation. If the problem is that you have poor credit, over the long term you should work on improving it. Luckily, this is not hard. The largest part of your credit score (35%) comes from your payment history, so commit to making on-time payments on all your bills each month. The next biggest chunk (30%) comes from amounts owed, so focus on paying down debt so your ratio of outstanding debt to available credit is lower. It can also help to have someone add you as an authorized user on their credit card or to open a secured credit card yourself so that you can build a responsible credit history.
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.
|5.75% – 16.24%1||$5,000 - $100,000|
|7.69% – 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|