How To Prequalify for a Personal Loan (2024 Guide) (2024)

If you want to check with a lender and find out your chances of getting approved for a personal loan, you can prequalify. This process can also show you how much you may be able to borrow and the interest rates the lender may offer you.

Not all lenders offer a prequalification process, but many do. Additionally, remember that prequalifying for a loan doesn’t guarantee that you will qualify (or receive the same terms) for a loan once you officially apply.

To prequalify for a personal loan, you usually have to provide the lender with some personal information, such as your name, income, employment status and the amount of money you want to borrow. You are likely to need to provide your Social Security number, as well. Filling out a prequalification form often authorizes the lender to initiate a soft inquiry into your credit report.

Once you complete the prequalification process, you will usually receive an estimate of the loan amount and loan terms (e.g., annual percentage rates, interest rates and repayment period) you may qualify for.

Some lenders use the term pre-approval instead of prequalification or use both terms interchangeably. With most lenders, these terms mean essentially the same thing. Other lenders may differentiate the two slightly and require more information for pre-approval.

In many cases, however, offers to “prequalify,” “get pre-approved” or “check your rates” all involve providing some personal and financial information to get an idea of your personal loan eligibility.

Each lender’s process for pre-approval may be slightly different, but the main elements are generally the same. Some lenders may offer prequalification and then pre-approval, but others just have one process and use the terms interchangeably.

Obtain Necessary Documentation

Most lenders require you to provide some critical information to get pre-approved for a personal loan. It’s usually less information that you would have to provide if you officially apply, but it’s often a good idea to gather all the necessary paperwork during the prequalification process. That way, you have everything ready if you decide to officially apply for a loan.

The exact details a lender requires for pre-approval may differ, but most will ask for your legal name, proof of residence, age, income information, employment details and the amount you want to borrow. You may also have to provide details on other financial assets, what you plan to use the loan for and the last four digits of your Social Security number.

Research and Compare Lenders

You may want to go through the pre-approval process with several different lenders. This could give you multiple offers you can use to compare lenders. If you decide to prequalify with multiple lenders, the first step is to research which ones offer pre-approval. You may also want to review each one’s pre-approval process so you know what to expect.

Another option for qualifying is to go through a loan aggregate website. This type of site allows you to fill out a single prequalification form that goes to multiple online lenders so you can see various potential offers and loan options, and compare them all at once. It can be a quick and easy way to find out which lender has the best chance of offering you a loan in the amount you want with the most favorable terms.

Apply for Pre-Approval

Once you’ve decided which lenders you want to prequalify with (or chosen a loan aggregate site to use), it’s time to fill out the pre-approval application. This is where you’ll use the documentation you gathered earlier to provide the lenders with information about you and your financial situation.

Lenders will likely look into your credit history, and some lenders may also require you to provide your debt-to-income (DTI) ratio. To calculate it, simply divide your monthly debt payments by your monthly gross income.

It’s crucial to be completely honest when filling out your pre-approval application. If you provide incorrect or inadequate information, the offers you get back may not be an accurate reflection of the personal loan terms you are eligible for.

Receive Pre-Approval Offers

Once you’ve filled out the prequalification paperwork, you should typically receive responses from the lenders fairly quickly. These pre-approval personal loan offers show you what kind of loan terms you can expect to qualify for if you choose to apply.

A prequalification or pre-approval for a loan is not a guarantee that you will be eligible for a loan or a loan offer with identical terms. However, the prequalification process can give you a basic idea of what you may qualify for. You can compare your pre-approval offers to decide which lender you want to officially apply to.

Getting pre-approved for a personal loan may sound like extra work, but it offers several benefits. Going through the pre-approval process gives you the chance to gather all the documentation you’ll need for your loan application, which can make the formal application go more smoothly. The pre-approval process is also a good time to check your credit score and calculate your DTI ratio, which can give you important insight into your financial situation.

For example, if you calculate your DTI and realize it’s higher than you thought, you may want to change something in your budget. Once you have a more accurate view of your overall financial situation, you can make an informed decision about what to do next.

Prequalifying also gives you more information about your borrowing power. You may receive pre-approval offers that are significantly better or worse than you expected. If the terms aren’t as good as you hoped, you can look for ways to improve your eligibility before officially applying. Having a cosigner or paying down other debts may help you qualify for better offers.

If you receive favorable pre-approval offers from multiple lenders, such as banks and credit unions, you can compare them to choose the best one for your needs. You may also be able to negotiate better terms using your prequalification offers. For example, you may be able to take your pre-approval letter to a lender you’d prefer to work with, like your current bank, and negotiate a comparable personal loan offer.

In most cases, you aren’t required to prequalify for a personal loan before officially applying. However, there are several situations when it may be advantageous to do so. Going through the prequalification process is often a good first step when you’re doing initial research to decide whether you want to get a personal loan. Prequalifying can give you a good idea of how lenders view your eligibility. If you don’t receive many pre-approval offers, you may want to wait to apply until you have a better credit score or a lower DTI.

Once you know the interest rates and repayment period you may qualify for, you can calculate how much your monthly payment would be. Plug that number into your budget and see how it fits. If you’re considering getting a personal loan to consolidate credit card debt, you can run the numbers to see whether you would actually save money by doing so.

Getting pre-approved can also show you your approximate borrowing capacity. You may find out that it would be difficult to qualify for a loan in the amount you wanted. Or you may learn that you could qualify for more than you originally thought. Having more information about a potential loan gives you the chance to consider your options, compare lenders and make the decision that’s right for you and your financial situation.

Before you apply for a personal loan, you can go through a prequalification or pre-approval process with one or more lenders. This usually involves providing some basic personal and financial information to the lender, along with details about how much money you want to borrow. Most lenders will run a soft credit check and then give you a prequalified loan offer.

This offer isn’t a guarantee of a loan. But it does provide you with a fairly good estimate of the rates, amounts and repayment terms you are likely to qualify for. If you get pre-approval offers from several lenders, you can compare them to find the best deal. You can also use your prequalification offers to approximate your monthly payments and determine whether getting a personal loan is the right choice. If you decide it is, you can formally apply to the lender with the best offer.