Although most personal lenders let you check your rates without a hard credit pull, not all of them do. Are you worried that a particular lender's rate-checking process could result in a hard credit pull and adversely affect your credit score? Look for an indication on the pre-approval page that checking your rates won't affect your credit score or something similar. If there's any confusion, ask the lender before allowing them to pull your credit report.
How to get pre-approved for a personal loan
Personal loan lenders will have different processes to get pre-approved for a personal loan, but most will require you to follow these steps:
- Fill out a pre-approval form. Many lenders have an online pre-approval form you can enter your personal information on. Some may require you to go into a branch or send a paper form to them. You will need to provide your personal information, employment history, income, debt, and any other information they require.
- Lender checks your credit. Lenders will then check your credit score and history to determine if it meets their minimum requirements. This is typically a soft credit check which will not hurt your credit score. Since it doesn't impact your credit, you should check with different lenders to find the best rate and loan terms. If you want to get pre-approved for a personal loan, ensure you have a good credit score. If not, focus on improving it until you get the score you need for a good rate. If a lender does not have a pre-approval option, then you will not know your loan terms until you actually apply. In this case, it may be a hard credit pull which will impact your score.
- Lender sends a pre-approval letter. If you qualify for a loan after the lender checks your credit, then it will send you a pre-approval letter that will state the terms and conditions of the loan, such as maximum amount, interest rate, and repayment terms.
- Formally apply for a personal loan. Once you have chosen the lender you want to work with, you will then formally apply. This usually requires documentation and a hard credit check by the lender. Many banks will disburse the money the same day or next business day. It is important to know that a pre-approval letter does not guarantee you will get approved for the loan. If you do not qualify for a loan, it will notify you with an adverse letter. It will give a reason on why you were denied, the credit agency it used, and how to get a free copy of your credit report.
What is a personal loan pre-approval letter?
A pre-approval letter is a document from a financial institution stating it is tentatively willing to approve a personal loan up to a certain amount. During the pre-approval process, lenders will review your credit score and other factors. Lenders will want to ensure you are creditworthy before you apply for a loan.
The pre-approval letter will typically have the amount you qualify for, the interest rate, the repayment time period, and other loan terms. Many letters will have an expiration date on when the pre-approval is good until. Pre-approval letters may also have conditions you must meet, documents you need to provide, and other personal information to apply for the loan.
The personal loan application process
Once you've decided on the personal loan that makes the most sense for you, you'll need to proceed past the lender's pre-approval process and complete a loan application.
When you apply for a personal loan, you'll be asked for information that wasn't part of the pre-approval process. For example, the lender will want to verify your income with a W-2 or 1099, pay stubs, and/or a recent tax return or two. You'll probably also need to submit a copy of your driver's license or other ID and your Social Security card.
It's also a good idea to have your bank account information handy. Lenders generally don't require you to automate your loan payments, but many offer an interest rate discount if you do. Autopay can also be a good idea if you're concerned about getting your payments in on time each month.
Expect several rounds of documentation requests before the loan is finalized. This is especially true if you're self-employed or if any part of your application is complicated. This is normal, so don't be discouraged.
Once all of your documentation is received and verified, your lender will send you a promissory note and other documents to sign. Once the documents are returned to the lender, your funds can be disbursed. Depending on your lender, funds typically show up in your bank account in anywhere from one business day to two weeks (although some loans can take a bit longer). As you shop lenders, make sure to check out their funding times if you need the money quickly.
