4 Tips to Prequalify for a Personal Loan

2020-11-04T15:54:37-08:00November 4th, 2020|Personal Loans|

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4 Tips to Prequalify for a Personal Loan

Prequalifying for a personal loan can give you an idea of how much you might be able to borrow and at what terms. Personal loan prequalification means lenders take a preliminary look at your credit and finances to decide just how creditworthy you might be. This can be helpful for deciding which personal loan to apply for if you’re comparing options from multiple lenders. 

If you’ve never attempted to prequalify for a personal loan before, these tips can help with navigating the process. 

1. Check your credit first

Checking your credit reports and scores before trying to get prequalified for a personal loan can give you an idea of what loan terms you’re most likely to qualify for. 

Every lender sets the minimum credit score requirements for personal loans differently. So knowing where you stand credit-wise can help you weed out lenders that you’re least likely to get a loan approval from. 

Remember, checking your credit yourself doesn’t hurt your credit score.

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2. Narrow down your list of potential lenders

The next step in the personal loan prequalification process is deciding which lenders and loans are the best fit based on:

  • Your creditworthiness
  • How much you need to borrow
  • What you plan to use a personal loan for
  • Interest rates and fees
  • Prequalification and application process

You could try to prequalify for a personal loan with just one lender. But getting multiple prequalification offers through several lenders gives you more options to compare. 

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3. Complete your personal loan prequalification application

Whether you’re applying for a personal loan prequalification with a single lender or through an online personal loan marketplace, the process is more or less the same. 

You’ll have to give the lender some basic information so they can prequalify you for a loan. That includes;

  • Your name
  • Income and employment status
  • Existing debt
  • Estimated loan amount you want to borrow
  • Estimated credit score range

The lender uses those details, along with a soft credit pull, to determine whether to prequalify you for a loan. Similar to checking your credit yourself, a soft credit check won’t ding your credit history. But if a lender requests a hard credit pull to prequalify you, then that can show up on your credit report and trim a few points from your credit score. 

No credit check personal loans do exist. You could qualify for one with no credit check at all. But keep in mind that these loans can come with much higher interest rates and fees. 

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4. Review your personal loan prequalification offer

Once you complete the initial prequalification application, the next step is reviewing prequalification offers. If you’re prequalifying with several lenders to try and find the best personal loan for you, then it helps to compare the following:

  • Minimum and maximum loan amounts you can borrow
  • Loan interest rate and APR
  • Loan fees, including origination fees you pay upfront or any prepayment penalties you may pay on the back end
  • Loan repayment terms

It’s important to keep in mind that the prequalification terms you’re offered may not be the exact loan terms you get if you decide to complete the full application. But this can give you a framework of what you might receive if you move ahead with getting a personal loan from a specific lender. 

If you’re satisfied with one of the prequalification offers you received, the next step is completing the full loan application. This usually involves submitting financial documentation, such as pay stubs or bank statements. At this point, the lender will also complete a hard check of your credit. But remember that you’re not obligated to follow through with a personal loan if the finalized terms don’t work for your needs or budget.

What happens if you can’t get prequalified for a personal loan?

If you’re denied for a personal loan prequalification, you may be wondering whether you can change the lender’s mind or what other options you have for borrowing. Try these steps next if you’re unable to get prequalified initially:

  • Ask for reconsideration. Reach out to the lender you applied for prequalification with to find out why you were denied. If the reason was a lack of paperwork or a past credit mistake, you could ask them to reconsider. But you’ll need to be able to prove your ability to repay what you borrow. 
  • Double check your credit. If you only checked one of your credit reports prior to prequalification, it’s possible that you might have missed something that’s hurting your credit. Late payments and high credit utilization can work against you but credit reporting errors can as well. If you spot an error on your report, you can dispute it with the credit bureau that furnished the information. 

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Rebecca Lake

Rebecca Lake is a freelance writer specializing in personal finance, credit and debt. She’s a contributor to U.S. News and World Report, Forbes Advisor and The Balance and her work has appeared online at CreditCards.com, MyBankTracker, Money-Rates.com and dozens of other top publications.

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