How to Apply for a Personal Loan: Step-by-Step Guide

Typically offered by banks, credit unions, and online lenders, a personal loan is a financing solution you can use to cover a variety of expenses. While the process varies among lenders, you can generally expect a lump sum of money upfront followed by repayment through monthly installments (with interest) over an agreed upon length of time (term).

In most cases, personal loans are unsecured, meaning they don’t require collateral, like your house or car. While personal loans vary in loan amount and term length by lender, most of them offer online applications, flexible terms, and quick funding.

Compared to other types of financing, such as credit cards, personal loans offer immediate liquidity, allowing you to pay various expenses while still working towards your long-term financial goals. Whether you’re facing an unexpected medical bill, ready to consolidate high-interest credit card debt, or looking to cover other large costs, a personal loan can come in handy.

BHG offers personal loans of up to $250,000¹ with fixed rates and terms of up to 10 years^1,2, making it easy for accomplished professionals to consolidate debt, cover expenses, and achieve a financially secure future.

Each lender has their personal loan requirements. However, most of them look for the following:

• Good credit: Since your credit score will indicate your ability to repay your loan, most lenders prefer borrowers with good to excellent credit scores. Strong credit can also lead to lower interest rates, potentially saving you thousands of dollars.
• Employment and income: Lenders prefer to extend personal loans to those who have a stable employment history and steady income that can cover monthly payments. Some lenders have set minimum income requirements while others are more flexible.
• Debt-to-income (DTI) ratio: Your debt-to-income ratio reveals how much of your monthly income goes toward debt. Since it can help gauge your ability to repay a new loan, most lenders consider it. Typically, the lower your DTI, the higher your chances of loan approval. Higher-income borrowers may have higher DTI thresholds because a substantial income can assure lenders that the borrowers have enough money to repay the loan, even if the DTI is elevated.

Once you decide to apply for a personal loan, you’ll need to gather some required documents, which vary by lender but usually include: 

• Government-issued ID, like a driver’s license, Social Security card, or passport (proof of identity)
• Utility bill or mortgage statement (proof of address)
• Pay stubs, tax returns, and bank statements (proof of employment and income)

In addition, you’ll be required to provide basic information about yourself, including your full name, address, phone number, and Social Security number. The lender might also ask for your desired loan amount and intended loan use.

Here’s what the personal loan application process entails:

1. Understand your needs

Think about what you hope to accomplish with a personal loan. Perhaps you want to cover moving expenses and refinance an existing personal loan. Or maybe your goal is to consolidate credit card debt so you can pay it off sooner and potentially save money in the process. Regardless, it’s important to clarify how much money you need and how you intend to use it.

2. Check your credit

Before you apply for a personal loan, it’s a good idea to check your credit so you know where you stand and what types of products you may qualify for. You can use free credit score monitoring websites or ask your credit card company if they offer credit score reporting. You can also request free copies of your credit reports from AnnualCreditReport.com and dispute any errors that may be lowering your score.

3. Shop around

Next, do your research and explore personal loans from different lenders. Most lenders will allow you to prequalify and check potential interest rates without any impact on your credit score. Be sure to compare eligibility requirements, rates, terms, funding times, and customer reviews to help you zero in on the best option for your unique situation.

4. Fill out an application

Once you find the ideal lender and loan, it’s time to formally apply. In most cases, you can submit an application online, via phone, or in person. Make sure you have your documents handy as you’ll need to submit them to complete the application. Note that you’ll likely have to agree to a hard credit check, which might temporarily bring down your credit score.

5. Wait for a decision and accept your loan

While approval times vary, most lenders offer instant or quick approvals, often within a few business days. Once approved, carefully review your loan agreement to understand your rate, term, fees, and other conditions. If something doesn’t make sense, don’t hesitate to consult your lender for clarity. Also, you might want to enroll in autopay (if your lender offers it) to ensure you make your payments ontime, every time.

BHG makes financing a breeze. Our hybrid loan application process makes the experience simple—you apply online with no obligation or hard credit check.³ Then, you are paired with a highly experienced U.S.-based loan expert who will listen to your needs and find the best loan to fit them. You can count on us to help you make an informed decision based on your lifestyle and needs. Best of all, we work around your schedule—because we know your time is valuable.

We know every financial profile is unique—that’s why we created highly customizable personal loans up to $250,000¹, terms of up to 10 years^1,2, and funding in as few as five days⁴ so you can meet just about any short or long-term financial goal.

What are you waiting for? See your personalized offers in just seconds. 

Will applying for a personal loan hurt my credit?

When you formally apply for a personal loan, your credit score might go down temporarily after the lender performs a hard credit inquiry. A hard credit inquiry typically stays on your credit report for two years. However, while it remains visible for that long, its impact on your credit score usually diminishes after 12 months. Credit scoring models, like FICO, generally only consider inquiries from the past year when calculating your score.

Can I apply for a personal loan without income proof?

Most lenders will ask you to prove your income so they can determine whether you’ll be able to pay back your loan. To do so, you can usually submit pay stubs, bank statements, and/or tax forms.

What’s the difference between pre-approval and approval?

A loan pre-approval means a lender has given a conditional commitment to lend you money, up to a certain amount, based on an initial assessment of your financial situation. It's not a guarantee, but it indicates that you're likely to qualify for a loan based on the information you may have provided through an application. An approval, on the other hand, means they’ve made a decision and extended a loan offer to you. Approvals are usually a guarantee of the funds you applied for.

How long does approval take for a personal loan?

Personal loan approval times vary by lender. Most lenders, however, offer quick approval in as few as 24 hours. BHG Financial will expedite your funds within as few as five days.⁴

Can I get a loan if I have other existing debt?

Absolutely! In fact, a personal loan might come in handy if you want to consolidate high-interest debt and simplify the repayment process. It can also add some breathing room to your budget so you can focus on other goals as you pay off debt.

Additionally, different types of financing positively impact your credit mix, which refers to the different types of credit accounts you have. It’s an important factor in your credit score, making up about 10% of your FICO score. A diverse mix of revolving credit (like credit cards) and installment loans (like personal loans or mortgages) can positively impact your score by demonstrating your ability to manage different types of credit responsibly.