Every year, more than 80 million Americans take out personal loans. They do it to consolidate credit cards, pay for emergency car repairs, catch up with medical bills, and more.
Do you think that you might be able to benefit from taking out a personal loan? If so, you should take the time to learn about the different personal loan requirements.
Not everyone will qualify to take out a personal loan from one of the many lenders located throughout the country. You have to meet a series of requirements to get your hands on the money you need.
Here are some of the most important personal loan requirements to keep in mind when filling out a loan application.
Copy of Credit Report
When is the last time you took a good, long look at your credit report? If it’s been a while now, you’re going to want to check it out before you fill out a personal loan application.
Everyone is entitled to obtain one copy of their credit report from each of the three credit bureaus every year. You should make sure that you take advantage of this, regardless of whether you’re taking out a loan or not.
Your credit report will reveal things like:
- How many credit cards you have
- What your balances are on your credit cards and how much available credit you have
- How often you’re making late payments on your credit cards
- Whether you have any debt that has been taken to collections
It’s good to look through your credit report for your own sake. But it’s also good to do it right before trying to take out a personal loan.
When you learn more about applying for a loan, you’ll see what a big role your credit report is going to play in the process. It’s going to be one of the first things creditors look at when considering you for a loan.
Good Credit Score
After you apply for a personal loan, creditors will work to get a copy of your credit report themselves. They’ll look through it to see where you stand as far as debt is concerned.
They’ll also work to figure out what your credit score is. That alone is one of the most important personal loan requirements since a low credit score could prevent you from getting a loan.
Your credit score is a number that sits somewhere between 300 and 850. The higher that your credit score is, the more likely you are to get approved for a personal loan.
Technically, you can get a personal loan no matter what your credit score is. Some lenders specialize in working with those with bad credit.
But to get great terms on a personal loan, you’ll need to have “good” credit, which is anything over 700. Those with credit scores over 800 are said to have “excellent” credit and will get the best deals of all on loans.
Your credit report and your credit score might both look good to a lender. But prior to providing you with the money that you need, they’re going to want to see that you have some money coming in every month.
A lender will ask you to tell them how much money you make each year. They’ll also usually ask you to verify your income by sharing either your recent pay stubs or your income tax return from the previous year.
Some lenders will go the extra mile as well and touch base with your employer to make sure you’re still employed. They’ll feel better about loaning you money when you meet these personal loan requirements.
If a lender is on the fence about giving you a personal loan, they might ask you to provide what’s called collateral for them. Collateral is something of value that you put on the line and promise to give up to a lender in the event that you default on a personal loan.
Cars are probably the most common form of collateral, but you can use any number of things as collateral if a lender asks you to provide it. Homes, boats, and even jewelry are other good examples of collateral.
You should think long and hard about whether or not you want to put something important to you up as collateral. You could end up losing it if you’re not careful about taking out a personal loan.
Creditworthy Cosigner (If Necessary)
Even with some kind of collateral in place, a lender still might not feel 100% comfortable giving you a personal loan. If it gets to this point, you might be tempted to give up on the idea of getting a loan in the first place.
But there’s one other thing you can try to get a loan. You can convince an immediate family member or a really good friend to serve as your cosigner. As long as they have good credit, a lender might accept this as one of your personal loan requirements.
Just make sure that both you and your cosigner know what you’re getting yourselves into if you take this approach. If you fail to repay your personal loan, your co-signer could be on the hook for it. This could cause a rift in your relationship.
Meet These Personal Loan Requirements and Get the Money You Need Now
For some people, it’s not difficult at all to qualify for a personal loan. Those with “good” and “excellent” credit will often qualify for one in a hurry without having to put forth much effort at all.
But for other people, it can be a real challenge to get a personal loan. Those with less-than-ideal credit will need to work extra hard to meet the personal loan requirements.
The loan industry has become very competitive in recent years, though, which has forced many lenders to open up their services to a wider audience. This might make it easier for you to obtain a personal loan than ever before.
Browse through the in-depth articles on our blog for more information on personal loans.