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How Personal Loan Pre-Approval Works

Dana George
By: Dana George

Our Loans Expert

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If today's low interest rates have you thinking about a personal loan, you have plenty of great unsecured personal loan lenders from which to choose. Whether you want to consolidate debt or make an addition to your home, the first step is pre-approval. Here, we'll tell you what you need to know about the pre-approval process and discuss what you can expect after you've made it through.

We'll also cover some tips to help you navigate the process and choose the best personal loan for you.

What is a personal loan pre-approval?

Pre-approval is the period during which a lender determines your eligibility for a loan. It's a simple process. You provide the lender with information about your income and employment. The lender then runs a soft credit check to get a sense of how well you've handled debt in the past and whether you can easily handle the monthly payment.

After they've run the soft credit check, the lender lets you know whether you qualify for a loan with them, and if so, what your interest rate will be. It's also during this time that you'll learn more about the loan offer, including terms, origination fee, and other charges levied by the lender.

To be clear, a pre-approval isn't a binding offer. The pre-approval is based on the information in your credit report and other information you provide. The personal loan application involves more documentation.

For example, your pre-approval might be based on a certain amount of income. What happens if your lender is unable to verify your income? You could be rejected for the loan -- even though you passed the pre-approval process.

Prequalify vs. pre-approval, what's the difference?

While many people use the term prequalify and pre-approved interchangeably, there are some differences to be aware of. Pre-approval is typically a better indicator if you qualify for a loan compared to prequalifying for a loan. Here are the differences between the two.


A prequalification is an estimate of how much you may qualify for. A lender will rely on the information you provide and not a third-party source like a credit report. The lender will give you how much you can expect to borrow based on the income, employment history, debt, and other factors you provide. A lender will not look more deeply into your financial situation until you get to the pre-approval and application stage. Since a borrower can give inaccurate information, a prequalification is not as reliable as a pre-approval.


A pre-approval is more involved and since the lender will check your credit report, it is a better indication if you qualify for a loan. You will need to submit your information to the lender and the lender will perform a soft pull on your credit report. This will not impact your credit score. Since the lender verifies the information you give, they are able to better determine if you qualify for the personal loan. When pre-approved for a loan, you will know how much you are approved for, your interest rate, and other loan terms.

Will a personal loan pre-approval affect your credit score?

No, not usually. Most personal lenders conduct what's known as a soft credit pull. Think of this as an "unofficial" credit check. The lender views a report containing your credit score and credit history, but no official credit inquiry (also known as a hard credit pull) is performed. A soft credit check has no impact on your credit score.


Inquiries only make up 10% of your overall credit score

FICO says hard inquiries generally have a small effect on your credit score, with many people seeing less than five points taken off. This drop will be brief and your score should return back to normal within a few months.

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Lenders that offer pre-approved loans

Here's a list of lender that will allow you to fill your application online to get a pre-approved loan. The lender will conduct a soft credit check and it will not impact your credit score. You will know how much you qualify for, your APR, loan length, and other loan terms.

The Ascent's best personal loans

Looking for a personal loan but don’t know where to start? Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you.


  • Some people who are pre-approved may be denied when they actually apply. A pre-approval does not necessarily guarantee a loan approval. If your credit score or other factors changed from the time you were pre-approved to when you submitted your application, the lender may deny your application.

  • How long a loan pre-approval lasts will depend on the lender and the type of loan. A personal loan pre-approval offer will typically have an expiration date, which may last 30 days to 60 days. Every lender is different so it is important to find out what the time period is.

Our Loans Expert