How to get a personal loan in 5 simple steps (2024)

Getting a personal loan is a simple process you can often complete within a day. However, to get the best terms, you need to do more than fill out a single loan application.

CNBC Select lists the steps we recommend taking to get a personal loan, from figuring out what you can qualify for to choosing the right lender.

• Check your credit score
• Figure out how much you want to borrow
• Shop around for a lender
• Compare multiple offers
• Apply for a loan
• Bottom line

If you haven't checked your credit in a while, now's the time to take a look. This will give you an idea of which lenders you should target since they each have their own credit requirements. Some only stick to borrowers with credit that's considered "good" or better (or a FICO score of at least 670). But plenty of lenders work with people who have lower scores, too.

Besides, your credit score will also influence the interest rate you'll get. Most lenders advertise their interest rate ranges, so knowing your credit will help you see what you can expect.

To check your credit, you can use a free credit monitoring service, such as Experian Dark Web Scan + Credit Monitoring. You'll receive an updated FICO score once a month, as well as your Experian credit report.

You might already know the sum you need, but that's not the only thing to consider. Take a look at your monthly budget and determine how much you can comfortably afford in monthly payments. Remember that the amount you borrow will be the loan's principal balance, but you'll also have to pay interest. Research a few lenders to see their interest rates and include them in your estimates. You can use a personal loan calculator to make the math easier.

Another potential cost to keep in mind is an origination fee. This is a one-time upfront charge many lenders subtract from your loan proceeds. It can range anywhere from 1% to 10%. While it reduces the amount of money you actually receive, you'll still owe the full balance, plus interest. For example, if you borrowed $10,000 and paid a 10% origination fee, the lender would deposit $9,000 into your bank account. However, you'd have to pay back the full $10,000 plus any interest on the same amount.

It might be tempting to just borrow from the financial institution you're already banking with. But to get the best terms, it's essential to shop around.

Pick a few lenders where you meet at least the minimum credit score requirements. Make sure the lenders don't have any restrictions around the reason why you are taking out the loan — for example, some lenders won't give out a personal loan to help pay for a business expense. And if you need the funds urgently, it also helps to focus on lenders who can deposit the money within one day.

Many lenders offer prequalification which allows you to receive estimated loan terms with only a soft credit inquiry. Use this tool to compare at least three loan offers.

To properly compare terms, you'll want to pay attention to more than just what you owe each month. For instance, a lower monthly payment might be the result of a longer repayment term. Even if the interest rate is the same, a longer term will still increase the overall cost of the loan since the interest will accrue for a longer time.

Origination fees are another consideration. If your credit score allows, focus on lenders that don't charge those. For example, LightStream, our pick for the best overall personal loan, requires no origination fees. Neither does SoFi, which also lets you choose between a fixed and variable APR. You need at least good credit to work with either of these lenders.

Once you've picked the best offer, you can apply for the loan. Most of the time, you can complete this step online. Each lender has their own guidelines concerning the application process, but you'll typically need to provide a valid ID and verify your address by attaching your lease agreement or utility bills. The lender will also want proof of income, such as tax returns, pay stubs or bank statements.

Your application will trigger a credit check. This means you'll see a hard inquiry on your credit reports which may cost you a few credit score points. If you're approved, you'll receive the money based on the lender's timeline. While some lenders can disburse the loan funds within 24 hours, others could take a week or longer.

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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every loan guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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