Whether you have credit card balances you want to consolidate or need a lump sum of cash to make a home upgrade or car repair, it’s good to know that you can possibly get a personal loan online fast and with minimal effort.
Online lenders have made it easy to research and apply for a personal loan online, but there are a few key steps to follow to make the process go smoothly and improve your chances of getting approved.
Key Takeaways
- Getting a personal loan online is typically easier and faster than applying in person or over the phone.
- Online personal loans can be used for any purpose and are available for borrowers with different levels of credit.
- Personal loans provide a lump sum of cash that you repay in regular monthly payments.
- Getting a personal loan requires you to upload documents to verify your identity and income.
How to Get a Personal Loan Online
Getting a personal loan online starts with assessing your current financial situation and figuring out how much you need to borrow. From there, you can begin your online personal loan search. Here are the common steps in the process.
Review Your Finances
Before you apply for an online personal loan, you’ll want to get a sense of your credit score and credit history. The better your credit rating, the more (and better) loan options you will have. You can pull your free annual credit reports from the three credit bureaus (Experian, Equifax, and Transunion) via AnnualCreditReport.com. You may also see your credit score online, either through a credit card account or bank account.
Next, review your budget to figure out how much of a monthly loan payment you can comfortably afford. Maintaining on-time monthly payments is important for paying down the loan and keeping your credit healthy.
Finally, determine how much you want to borrow. You’ll want a personal loan that’s large enough to cover your expenses, but not more than you need or you will incur more interest. A larger loan will also potentially damage your credit score with a larger amount of debt.
Online personal loan options are available for people with poor credit, but they will have a higher interest rate.
Shop Online for a Personal Loan
Once you understand your credit and know how much you need, you can shop for a lender. Research the best personal loans online and compare their interest rates and terms. Include offerings from your current bank or credit union.
Look at factors like interest rates, fees, term options, how long it will take to receive your funds, and how the lender’s customer service ranks in online reviews.
Get Pre-Qualified and Select a Lender
Once you’ve narrowed down your list of potential online personal loans to two or three, you can apply for pre-qualification if the lender offers it. Pre-qualification will allow you to get an estimate of what your cost would be without a hard credit check. If a lender you’re interested in doesn’t offer pre-qualification, you can still request a quote, but it may have a credit impact.
With all of the information, you can make the final decision of which online personal loan is best for you.
Apply for the Loan
When you’re ready to apply for a personal loan online, gather any necessary documents, such as identification, pay stubs, or bank statements. Most online personal loan applications let you scan or take a photo of your documents and upload them, as well as e-sign the application without requiring paper mailing or printouts.
A typical online loan application will ask you to fill in your personal contact information, your income and debt obligations, your requested loan amount, and the reason you’re borrowing the money. The whole process should only take a few minutes.
Approval for an online personal loan can take anywhere from a few minutes to a few days depending on the lender and whether it requires additional documentation.
Close on Your Loan
If approved, you’ll get your loan offer. Take your time to read the entire document carefully so you understand your costs and obligations. Once you sign and agree to the loan terms (and the designated time period to change your mind passes), the loan funds are yours.
Most online loans let you set up automatic payments from your bank account so you can avoid late payments. You may have to wait until you receive your first bill to set up automatic payments, though some online lenders may let you do it immediately.
When Is It a Good Idea to Get a Personal Loan Online?
When you borrow money, consider the pros and cons to make sure the loan is a good financial decision for your personal situation.
Getting a personal loan online may be a good idea if it can help you improve your finances, such as if you are consolidating debt to a lower rate. Personal loans can also help you pay for necessary unexpected expenses like replacing broken pipes in your kitchen. If you can reliably repay the loan, you can use a personal loan for a large expense like a vacation.
Carefully consider how your repayments will fit into your budget and the impact of the debt on your overall credit.
Personal loans are fairly accessible, allow you access to cash quickly, and usually let you pay back with fixed payments for a set period of time. However, depending on your situation, some personal loans may have high interest rates or fees. And the longer the loan term, the more you will pay in total interest.
Though most personal loans are fixed rate, some lenders offer adjustable rate personal loans as well. Fixed-rate loans give you predictability, while adjustable rate loans may offer initial lower monthly repayment amounts.
What You Need to Get a Personal Loan Online
To get a personal loan, the minimum requirements are usually that you must be 18 years old and a U.S. citizen. (Some lenders may work with non-citizens, but many do not.)
Lenders also usually require some combination of the following documents to verify your identity and employment/income.
Personal Identification
- Government-issued ID (i.e. birth certificate, driver’s license, passport)
- Proof of address (utility bill, mortgage statement, lease agreement, property tax bill, etc.)
- Contact information (phone, email address)
Financial Documents
- Bank statements
- W-2 form, 1099s, and/or pay stubs
- Tax returns
Lenders will also need your permission to run a credit check on you to make sure that you meet their credit requirements.
Choosing a Personal Loan Online
When you choose an online personal loan, make sure that the loan’s terms and costs are acceptable to you, and that the lender is reputable and offers a good customer experience. Here are some factors to help you choose the best personal loan online for your needs.
Rates and Fees
Compare the cost of borrowing as you shop for online personal loan options. Look at the interest rate, origination fee (if applicable), as well as other fees that might be assessed, such as application fees or late fees.
Also, confirm the lender will not charge prepayment penalties, which will give you the option to pay the loan off early and save on interest without incurring added costs.
Term Options
Determine the length of loan you’d like and ensure the lender offers that term. Some lenders offer more term options than others. Longer terms let you keep the monthly payment lower but usually result in more total interest, and shorter loans will have higher monthly payments but lower overall interest costs. The right term for you will depend on your budget.
User-Friendly Application and Account Management
One of the main benefits of getting a personal loan online is the simplicity, speed, and convenience these loans offer, versus visiting a bank office and filling out paperwork. Many online personal loans try to streamline their applications so they can be completed in just a few minutes, while others may set you up with a phone representative to walk you through the application.
Make sure the lender makes the loan account easy to manage once you have it, either online or via an app, or by setting up auto payments.
Lender Reputation
Banks and credit unions offer a variety of personal loans online. Make sure to research the lender you choose, especially if you’re considering a lender you don’t know. Find out how long it has been in business, check its Better Business Bureau profile and customer reviews for red flags, and make sure it provides a contact number you can use if you have any questions.
When completing a personal loan application, you may have to upload photos or scan documents, as well as agree to use an e-signature. If you’re not tech savvy or don’t have a smart device, you may want to ask a family member or friend to help you.
What's Negotiable
When shopping for a personal loan online and gathering quotes, remember you may be able to negotiate some aspects of the loan. For example, you may be able to negotiate the interest rate and any add-on fees (like administrative or origination fees) depending on the lender. Keep in mind that some lenders will not negotiate.
Having a strong credit score and quotes from other lenders can give you leverage when negotiating.
Alternatives to Getting a Personal Loan Online
If getting a personal loan online is not right for you, you can consider some alternative ways of financing a large expense. They include:
- Home equity loan or home equity line of credit (HELOC): If you are a homeowner with equity and good credit, you might want to tap your home equity. Loans and lines of credit might offer better rates than you’d find with personal loans. However, just be mindful that your house is the collateral, which means you could lose it to foreclosure if you are unable to make payments.
- Balance transfer credit card: If your main goal is debt consolidation and your credit is still strong, a balance transfer credit card with an extended 0% APR intro offer could be a good solution. You’ll move your balances over to the new card and then have a set period of time without interest to pay it off. Some cards offer a year or more, but there may be an upfront fee. Credit cards have a significantly higher interest rate than personal loans, so it’s important to aim to pay down the card before the 0% introductory period ends.
- 401(k) loan: A 401(k) loan may be a viable option for financing for some situations, such as if you need a down payment for a home. You’re essentially borrowing from yourself, and you can set up regular payments from your paycheck to replace the funds over time. However, financial advisors often recommend against borrowing from retirement accounts in most cases. You lose the opportunity cost on those investments and you risk being responsible for paying it back if you lose your job.
Is It Safe to Get a Personal Loan Online?
Getting a personal loan online is just as safe as any other digital financial transaction. The key is to make sure you find a reputable lender that takes measures to ensure that your data is well protected. Unfortunately, there are some predatory lenders online, so it’s important that the company you choose is legitimate and follows best consumer practices.
Can You Get a Personal Loan Online With a Cosigner?
Some online personal loans do allow you to add a cosigner, but not all do. If you are applying with a cosigner, then be sure to choose a lender that offers that option.
What Can a Personal Loan Be Used For?
In general, a personal loan can really be used for whatever you’d like, Some common uses for personal loans include: debt consolidation, medical costs, tax bills, home improvements, emergency repairs, or moving costs. But personal loans do have some exclusions. You can’t use a personal loan for a home down payment or college tuition, for example. It also can’t be taken for business uses.
What Credit Score Do You Need for a Personal Loan?
Personal loan minimum credit score requirements vary by lender. Higher scores will usually mean more favorable rates and terms. Generally, if your score is in the high 600s, you should be able to qualify for a personal loan. There are personal loans available for those with lower credit as well, however.
