Unsure You Can Get a Personal Loan? Do This First

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  • Personal loan companies have a wide variety of credit standards, so it can be confusing to know which lenders are most likely to approve you.
  • Fortunately, most lenders allow you to check if you qualify with a quick and easy process.
  • Personal loan prequalification generally involves a soft credit check, which doesn't hurt your credit score.

Over the past decade or so, the personal loan industry has evolved and grown tremendously. There are now more companies than ever willing to originate personal loans, and many of them operate almost exclusively online.

However, these personal loan companies have a wide variety of credit standards, so it can be difficult to know where you'll qualify. Fortunately, many lenders make it quick and easy to find out.

Personal loan prequalification

Most personal lenders make it quick and easy to check your personalized rate offers and whether you're likely to get approved for a loan. Typically, this involves visiting the personal loan originator's website, filling out a short form with identifying information, and clicking "submit."

The best part is that virtually all of the top personal lenders will allow you to prequalify and see your personalized rate and term offers without impacting your credit score, by using something known as a soft credit check.

What is a soft credit check?

When creditors check your credit, there are two different ways they can do it. A hard credit check can be thought of as a formal credit pull. This is also known as a "credit inquiry," and will show up on your credit report. Hard credit checks can potentially hurt your credit score, although the impact of a single hard inquiry is likely to be minimal.

On the other hand, a soft credit check can be thought of as a creditor taking a peek at your credit report, but not making a formal inquiry. A soft credit check doesn't affect your credit score and works the same way that credit card companies "pre-qualify" you for offers you receive. This is what personal loan companies mean when they say "check your rate without affecting your credit score."

To be perfectly clear, you don't have to agree to a hard credit check to see your personalized rate offers and pre-qualify for approval. But once you accept a lender's offer and formally apply, a hard credit inquiry (which may slightly impact your credit score) will likely be conducted.

Check your offers even if you're sure you'll qualify

Because most lenders will allow you to see your personalized loan offers with a quick and simple soft credit check, there is no reason not to shop around -- even if you're virtually certain that you'll qualify for a loan from any personal lender.

Simply put, you might be surprised at the difference in personal loan rates the same borrower will be offered by several different lenders. As stated earlier, each lender has its own credit standards and underwriting process. And as a result, it's entirely possible for a borrower with good credit to get an offer of an 8.49% APR from one lender and a 12.99% APR from another, even if you're requesting the same repayment terms and loan amount.

The bottom line is that since most personal lenders offer the ability to check your rates and qualification status without a hard credit pull, it's a good idea to take the time to shop around. Not only will you know where you'll be able to get a personal loan, but you'll also know that you're getting the best deal available to you.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

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