What documents are required for a personal loan?


To get approval for a personal loan, you need to provide certain documents to your lender. These documents are used to prove your personal and financial information. A lender will review them before deciding whether or not to extend a loan offer to you.

Although each lender has their own application and eligibility requirements, many of them are looking for similar documents. By familiarizing yourself with the types of documents you might need, you can prepare for the application process and increase your chances of getting approved.

Questions you should be prepared to answer

Prepare for your personal loan application by thinking about your loan goal and eligibility.

1. Why do you need to borrow this money?

A personal loan is flexible, which means you can decide how you want to use it. Maybe you want to consolidate high interest rate debt, or maybe you want to cover an unexpected auto repair or home improvement project.

While most lenders don’t care too much about how you will use the loan, understanding its purpose can help them recommend the loan product that is best suited to your needs. Some lenders offer specific loans such as debt consolidation loans or home improvement loans.

2. How much can you afford to borrow and for how long?

Take a close look at your budget to determine how much you can comfortably pay for your loan each month. Also consider how long you want to make these payments. Remember, you’ll pay a lender a fee (via interest) on every penny you borrow. While a longer loan means lower monthly payments, it will cost you more in interest, so you need to figure out what’s most important to you.

Ultimately, the lender will determine how much they are willing to lend based on an analysis of your financial health and a determination of what you can afford. They will look at factors like your credit rating, debt-to-income ratio, employment status, and income. Remember, the lender doesn’t know your other financial goals, so just lending you a certain amount of money doesn’t mean you’ll want to take it all.

3. What is your credit rating?

Before applying for a loan, it is important to know your credit rating. This three-digit number can give you an idea of ​​how likely you are to be approved by a certain lender. If available, take advantage of a tool called prequalification. This lets you know if you qualify for a loan with only soft credit, which will have no impact on your credit.

Once you start the loan application process, the lender will perform a brutal analysis of your credit score, which will affect your credit. While some lenders only lend to borrowers with a high credit rating, others are forgiving and willing to try their luck with those with a lower credit rating. Just keep in mind that if your credit score is low, you may need to take a higher interest rate.

Personal loan documents that your lender may require

During the initial application and during the verification process, you may need to provide your lender with a few documents. Most documents can be submitted electronically.

1. Loan application

Each lender will have their own application to initiate the loan process, and this application may be different from one lender to another. For example, if you are borrowing from an online lender, the application process is often done entirely online. If you are borrowing from a traditional bank or credit union, applications can usually be completed in person or online.

This initial request is usually basic – it will often ask for your personal information, such as your name, address, phone number, date of birth, and Social Security number. You may also need to state the desired loan amount and purpose.

Some lenders will want you to include additional financial details like your gross monthly income or your monthly rent or mortgage payment. Be sure to fill in to answer each question accurately.

2. Proof of identity

Besides obvious reasons like identity theft, lenders should be able to verify your identity to determine if you are a U.S. citizen or permanent resident and if you are at least 18 years of age. They might also want to confirm that you have a valid and active bank account. You will usually need to show two pieces of identification, such as:

  • Driving license
  • Passport
  • State issued identity document
  • Citizenship certificate
  • Birth certificate
  • Military ID
  • Social security card

In most cases, you can make copies of both of your pieces of ID so that you don’t have to submit your originals to the lender. Once done, be sure to keep the originals in a safe place so you don’t lose them.

3. Employer and income verification

Unsecured personal loans are different from many other types of loans, such as mortgages or auto loans, in that there is no collateral for the loan. This increases the risk of the lender and makes it even more important for him to verify that you have a stable source of income to repay the loan.

If you are traditionally an employee, you can usually verify your income with the following documents:

  • Payslips
  • Income tax returns
  • W-2 and 1099
  • Bank statements
  • Employer contact details

If you are self-employed, you can usually verify your income with the following documents:

  • bank statement
  • 1099s
  • Tax returns

To find your pay slips and tax forms, connect to your payroll provider’s online database or contact your human resources or payroll department. If you work with a CPA or other tax professional, they may also be able to help you find tax forms. You can retrieve copies of your bank statements online after logging into your bank account. Do not hesitate to contact your bank if you do not see them.

4. Proof of address

Proof of your life situation can help a lender determine the stability of your lifestyle. You can usually use one of the following:

  • Utility bill
  • Lease or rental contract
  • Mortgage declaration
  • Proof of insurance for your home, lease / rental or vehicle
  • voter’s card
  • Property tax receipt
  • Bank or credit card statement

If you need a change of address confirmation, the U.S. Postal Service has resources to help you change and confirm a change of residential address. While the fastest and easiest way to do this is online, you can also go to your local post office and fill out a form in person.

What if you don’t get your loan approved?

If you are not getting approved for a personal loan, there are a few other options to consider:

  • Get a co-signer: A co-signer adds their name to your loan application. They agree to repay the loan as well as the additional costs in the event of default. If you have a trustworthy friend or family member with good or excellent credit, they can help you get approval for a co-signed loan. Note that your co-signer will likely need to provide the same documents as you when you both apply for the loan. If you go this route, make sure you pay it back on time to avoid damaging your relationship.
  • Opt for a secure personal loan: Most personal loans are unsecured, which means they don’t require collateral like your home or car. Secured personal loans, on the other hand, are backed by collateral. If you don’t repay your loan, the lender can seize your collateral. By applying for a secured personal loan, you can reduce the risk of the lender and thereby increase your chances of approval. Keep in mind that you will need to show documents proving the value of the collateral and that you own it.

The bottom line

Applying for a personal loan doesn’t have to be stressful. Be prepared to answer questions and provide the required documentation, and you’ll likely have a smooth experience borrowing the funds you need. But remember, you won’t just owe the lender the amount you borrowed; you will also owe all the interest accrued during your repayment period, so be sure to seek out the best lender that offers you the best interest rate and the lowest fees.

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