Personal loan requirements are defined by your chosen lender and have a few different elements. This can include both personal details (identity, age, and residency) and financial details (income, employment, credit history, and your debt-to-income ratio).
The process doesn’t need to be stressful though. To help you feel prepared, we’ve gathered a list of everything you’ll need to meet personal loan eligibility.
Do you need a personal loan to consolidate and pay down higher-interest debt? Do you need money to pay for home improvements, help with unexpected expenses, or finance a dream vacation?
How you’ll use the loan funds can help you decide how much to borrow. It can even make it easier to choose a financial institution with loan offers that meet your needs.
Once you know why you need the loan, it’s time to estimate how much you’d borrow. If you're looking for a debt consolidation loan, add up all the debts you want to combine to figure out how much you need to consolidate debt.
Decide how much you can comfortably afford to pay each month. Also, think about how long you want or need to pay off the loan. Discover® Personal Loans provides a simple tool to calculate your potential savings when consolidating debt.
Different financial institutions may have different minimum eligibility requirements, and your loan approval odds depend on how well you meet the lender’s requirements.
Those requirements can include:
For a Discover personal loan, for example, you must have a minimum individual or household annual income of $25,000 to be considered.
Your credit score is important. It influences the loan amount, loan terms, and the interest rate that a lender might offer you. Lenders will set their own credit score standards for their loans, so do your research before you apply. You can find your credit score in several ways. It might be on your credit card statement, or you can get it from credit counselors, credit score services, or through the major credit bureaus along with your credit report.
Your debt-to-income (DTI) ratio may also impact your eligibility. This number compares how much you earn to how much you spend on rent, mortgage, credit cards, or other debt each month. Lenders may use your DTI to determine their risk in lending to you and whether they believe you have sufficient income to repay the loan amount you requested. In other words, your debt-to-income ratio is a measure of your creditworthiness.
It’s okay, and even important, to compare different lenders and how you meet their eligibility requirements before you decide to apply for a personal loan.
During the application process, your lender will want to ensure you have the ability to repay your loan. This means they may verify your employment and your income before approving your application. Beyond classic 9 to 5 employment, lenders often view freelance work, alimony, child support, or Social Security benefits as acceptable income.
The need for collateral is determined by the type of personal loan you apply for. Unsecured personal loans do not require collateral, while secured personal loans often do.
When you apply for a personal loan, the lender may require documents to prove the information on your loan application. If you don’t have those documents available, a lender might not be able to make an approval decision. This could delay your loan application or cause it to be declined.
This checklist can help you make sure you have what you need for your personal loan application:
To improve your personal loan eligibility, you should always check your credit report for any errors. That way, you’re submitting the most accurate picture of your financial health. You should also compare lender criteria and confirm you have all your documentation. If your debt-to-income ratio is high, you may even consider trying to decrease your overall debt.
You should be able to trust the people and companies that lend you money. Check for consumer reviews on the lender’s website and read reviews on websites that compare different banks, credit unions, and financial institutions. The more assurances you can get, the better.
Compare different lenders’ personal loan terms and requirements. Some lenders, like Discover, may offer a soft credit check to help you evaluate your loan offers. Discover Personal Loans lets you check the rates you qualify for with no impact to your credit score.
Additionally, some lenders charge origination fees that are deducted from the total loan approval amount. This means that you’ll receive less than you requested when the funds are deposited to your account. Others may charge a prepayment penalty that costs you extra money if you exceed the monthly loan payment and pay off your loan before the repayment term.
No matter which lender you choose, be sure you understand the application process and the repayment terms. Then, once you have the documents you need, the online loan application process can be fast. If you have questions, your lender should be able to help you complete your application.
Finally, if you are approved, read the loan agreement carefully before saying “yes.”
That’s it! With Discover Personal Loans the application process is easy and fast. Discover also has live customer service available by phone or online.*
Now that you know what you need, see the steps involved in applying for a Discover personal loan.
* You can reach a live agent by calling 1-866-248-1255 during business hours. View business hours here.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., or its affiliates.
