How to Qualify for a Personal Loan

Before lending an unsecured personal loan — or one that doesn’t require collateral — companies need reassurance about your ability to pay it back in full. To determine this, they look at factors such as your credit score and debt-to-income ratio.

Check your credit score

Your credit score is a major factor when qualifying for an unsecured personal loan. Although lenders typically don’t disclose what score they look for, most prefer good or excellent credit.

Before applying for an unsecured personal loan, make sure you know what your credit score is. You can check it out for free with services such as Credit Karma

Pay your bills on time

If your credit score is low, you could try to improve it by paying your bills on time.

On-time payments will help increase your credit score and, as a result, boost your chances of getting an unsecured personal loan.

“One of the main qualifiers for unsecured personal loans is your credit score, so folks should get to work on beefing that up before applying

Pay down your debt

Your debt-to-income ratio is another major factor affecting your credit score. If you have a high ratio, paying down your debt could help boost your score.

Come up with a plan to conquer your debt, whether by making extra payments or increasing your income by taking on a side hustle.

You also might open a new credit card to reduce your ratio, but be careful to not spend more than what you can afford just because you have access to more credit.

 Show you have a stable income

“A lender is going to look at other factors such as income and employment history,” said Ryan Skidmore of Lift Credit. “They want to ensure that you are getting enough money to make on-time payments.”

While lenders look at your credit score to understand your financial past, they typically also consider your income as a sign of your financial future.

Submit a joint application with a creditworthy cosigner

Besides improving your credit score and boosting your income, another step you can take to get an unsecured personal loan is applying with a creditworthy cosigner.

If your credentials are weak, your cosigner’s credit score and income could make up for them.

Find the right lender

Although lenders look at similar factors when considering you for a loan — credit score, income, history of debt repayment — each company sets its own underwriting requirements.