What Is Needed to Obtain a Personal Loan From a Bank?

by Ciele Edwards ; Updated July 27, 2017
Personal loan lending guidelines vary by financial institution.

Banks provide consumers with a variety of loans intended to suit different purposes. Mortgage loans, auto loans and home equity loans are all available from both brick-and-mortar and online banks. Unlike other types of loans, personal loans are not secured by collateral and therefore carry higher interest rates. The benefit of these loans is that you can use the money as you see fit. Before your bank will provide you with a personal loan, you must submit financial documents and demonstrate that you are capable of repaying the amount you borrow.

Loan Application

Before the bank or credit union grants you a personal loan, you must complete a basic loan application. Applications vary depending on the financial institution backing your loan, but the typical loan application requests your personal information, such as your name, birth date and Social Security number. Although the Fair Credit Reporting Act does not require lenders to ask consumers’ permission before pulling their credit records when they apply for a loan, most loan applications will request your permission to conduct a credit inquiry.

Credit Report

You do not need to bring a copy of your credit report with you when you apply for the loan, but this document is crucial to the approval process. The bank pulls a copy of your credit report from the credit bureaus and reviews information about your past debt payment history when deciding whether you qualify for a personal loan and, if so, how high your interest rate should be.

Proof of Income

You must provide the bank with proof of your income when you apply for a personal loan. This demonstrates to the bank that you can comfortably afford the payments. A copy of your most recent pay stubs, a certified letter from your employer or tax returns serve as proof of how much you earn. The documentation the bank requires to prove your income will vary depending on the financial institution.

Co-signer

If you do not have a strong credit history or your income does not meet the bank’s requirements for lending, you may need a co-signer to obtain a personal loan. A co-signer pledges to repay your debt in the event you default. This lowers the bank’s risk and increases your chances of getting approved. Co-signers must possess a positive credit history and a steady income. Paying your loan on time is especially important if a loved one co-signed for you. Not only does missing payments hurt your co-signer’s credit, but the bank can legally pursue your loved one for payment in full if you default on your loan payments.

About the Author

Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.

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