How to Get Approved for a Personal Loan

Am I eligible for a personal loan? Lenders use different criteria to decide whether to approve a loan or not. Good credit and a steady income are typically the most important personal loan requirements.

Why those things? Your credit scores give lenders an idea of how likely you are to pay back what you owe. FICO^® scores, which are used by 90% of top lenders for loan decisions, range from 300 to 850. The higher your score is on this range, the better you look to lenders.¹^,²

Income is also a factor since lenders want to make sure you have enough money coming in to manage your monthly payments. With that in mind, let’s look at how to get approved for a loan.

1. Check your credit score

We’ve mentioned the importance of your credit score. Now, you need to find out where you land on the score range and the role it plays in how to borrow money.

Chime members can check their FICO® score for free in the Chime app.* You can also get free credit scores through:

• myFICO.com (Equifax scores only)1
• Experian Credit Boost3
• Your credit card company, if a free FICO score is offered as a member benefit

What is a “good” credit score?

According to FICO, it’s a score of 670 or higher. If your credit score is higher than that number, a lender may be more likely to approve a loan.²

2. Calculate the amount you need to borrow

Think about why you need a personal loan. Some of the most popular reasons for personal loans include:

• Debt consolidation
• Home improvements
• Large purchases, like a wedding or vacation
• Emergencies

Ask yourself how much you realistically need to borrow. Borrowing too little could leave you with a gap to fill, and borrowing too much could mean paying more interest than you need to.

Keep in mind that lenders can set a minimum and maximum cap on personal loans. For example, the smallest loan available may be $500, while the largest is $100,000. Some states regulate personal loan limits, which can influence how much you can borrow.⁴

Your actual loan amount depends on how creditworthy you are in the lender’s eyes. A lower credit score could mean a smaller loan, while a higher score could allow you to borrow more.

3. Determine how much you can pay each month

Personal loans have to be paid back, and it’s important to make sure those payments fit into your monthly budget.

Sit down with your budget and look at how much you have left over after you cover all your monthly expenses and savings contributions. If the number is smaller than you’d like, go through your expenses to see if there’s anything you can reduce or cut out altogether.

Then, plug your desired loan amount into Chime’s loan calculator.

For example, a $50,000 loan at 9% would have a $1,038 monthly payment, assuming a five-year term. Experimenting with different loan amounts, repayment terms, and rates can give you a better idea of what you’ll pay and how that aligns with your budget.

4. Reach out to more than one lender

Somewhere out there is the right personal loan lender for you; you just may need to compare your options. Keep these factors in mind:

• Loan limits. Your ideal lender should offer loans in the amount you need to borrow. Check the minimum and maximum loan you can get.
• Qualification requirements. Some lenders share the minimum credit score and income requirements to get approved for a personal loan on their website. Look for a lender that offers loans to borrowers with credit profiles similar to yours.
• Interest rates. Personal loan rates are usually fixed, which means they don’t change over the life of the loan. But there can be a wide gap between the highest and lowest rates at different lenders. The best personal loan for you may be the one that offers the amount you need at the lowest rate.
• Fees. Lenders can tack on fees to personal loans that add to your costs. Check the fine print for origination fees, application fees, or late fees so you know exactly what you’ll pay.⁵

The best reason for personal loan approval in a lender’s eyes is a qualified borrower. Checking your credit scores, knowing what you need and what you can afford, and comparing lenders can help you narrow down the field and boost your approval odds.

Now, how long does it take for loans to be approved? It depends on the lender.

Online lenders may offer instant approval with loan funding in as little as one to two business days. If you go through a traditional bank or credit union, it could take a few days or a few weeks to get a decision. If you’re in a cash crunch, an online lender could be a faster way to get the money you need.

I need a loan but keep getting declined. Does that sound familiar? If so, it helps to understand why you might be turned down for a personal loan.

Lenders may deny personal loans to borrowers with poor credit or thin credit files, limited income, or because they have too much debt. In some cases, a denial is not a reflection on you personally. For example, a lender may pull back on loan approvals during a recession.

Whatever the reason, here’s how to handle a personal loan denial and avoid a repeat of the same situation.

Ask why your application was rejected

If you’re denied credit, a lender is required by law to send you a written notice explaining why. But you still have the right to call the lender and ask them to clarify their decision.6 This conversation could help you figure out a game plan to get approved on your next try.

For example, if the reason is bad credit, you’ll need to work on improving your score. The upside is that you know what to focus on; the downside is that improvement can take time.

What if you can’t wait? Then, you have to consider other options for how to get approved for a loan with bad credit.

For example, you might ask someone to cosign a loan with you. If they have a strong credit profile, that could help you get approved for a personal loan.

Review your credit reports for mistakes and errors

Your credit report offers lenders a snapshot of your credit history. If that history is wrong, it could hurt your credit scores.

One study found that 44% of consumers who checked their credit reports found at least one error. Some errors were related to their personal information, while others were related to their credit details.⁷

If you haven’t checked your credit report lately (or ever), it’s time to dig into the data. You can get a copy of your credit report from each of the three major credit bureaus for free through AnnualCreditReport.com.

As you review your reports, look for:

• Accounts that don’t belong to you
• Incorrectly reported payment history
• Inaccurate balances or credit limits
• Open accounts that are reported as closed, or vice versa

If you find an error, you have the right to dispute it with the credit bureau that’s reporting it. You can dispute credit report errors online for faster results or submit a dispute by phone or mail.⁸

The credit bureaus are required to investigate disputes and correct or remove errors they find. Getting an error corrected could add points back to your credit scores, which could help you get approved for a loan.⁸

Improve your DTI by paying off debt

If you have decent credit, but you’re still asking Why can’t I get a loan? your debt-to-income (DTI) ratio could be the problem.

Your DTI measures how much of your pretax income goes to debt repayment each month. DTI comes into play for mortgage loan approvals, but personal loan lenders can also use it to gauge your ability to repay what you borrow.9

If you have debt, consider how you might be able to pay some of it down. For example, maybe you could pay off your smallest credit card balance if you’ve got a little extra cash set aside. If that’s not possible, you can try the next tip.

Increase your income

Making more money could help you get approved for a loan if it lowers your debt-to-income ratio. How can you increase your income? Try these ideas.

• Take on more hours at work (if you’re paid hourly)
• Get a part-time job
• Start a side hustle or try gig work
• Negotiate a pay raise if you’re a salaried employee

You could also revisit your budget to downsize some of your spending. That won’t affect your DTI ratio, but it can show a lender that you’re mindful about where your money goes and can make your loan payments.

Seek a smaller amount

You could always try to get a smaller loan amount. A lender may be willing to work with you on a smaller loan since that poses less risk to them.

Of course, that means you may need to make up the difference elsewhere. You’ll have to decide how you’re going to come up with the extra money.

That could mean:

• Selling things you don’t need for extra cash
• Asking friends and family for help
• Exploring personal loan alternatives

A smaller loan means smaller payments, which could be easier to manage. Repaying a small personal loan on time can help you build a positive credit history, which could make it easier to qualify for a larger loan in the future.

Consider alternative financing options

If you’re denied a personal loan or get approved for less than what you need, consider how else you can borrow the money. We’ve already mentioned friends and family, but you could also try the following:

• Personal line of credit. A personal line of credit is a revolving line of credit that you can get from a bank or credit union. It works similarly to a credit card in that you can draw against your limit as you need, then pay down your balance as you go.
• Peer-to-peer loans. Peer-to-peer lending platforms connect investors with borrowers. These loans may be easier to get approved for with bad credit, but they can also have higher interest rates.
• Buy now, pay later. Buy-now-pay-later programs let you make purchases online or in stores and pay them off in installments. Some buy now, pay later lenders don’t require a credit check, which could make approval easier.
• Hardship and emergency loans. Hardship loans and emergency loans are designed for people who have a short-term financial need. These loans can offer fast funding and a streamlined application process.
• Short-term loans. Payday loans, title loans, and pawnshop loans are all short-term financing options. You can get cash fast, often on the same day, and you’re expected to pay it back within seven to 30 days. That’s appealing if you need money quickly, but these types of loans can have exorbitant rates, so they’re usually best avoided.

If all else fails, wait and apply for a personal loan later on. In the meantime, you can work on paying down some of your debt, increasing your income, or raising your credit score so you have the best shot at getting approved.

There’s no secret to how to get approved for a personal loan. It’s all about knowing what lenders are looking for and how you measure up. At the end of the day, the easiest personal loans to get are the ones that you’re most qualified for.

If you’ve done your research and you’re ready to jump in, learn how to apply for a personal loan.