Guide for First-Time Personal Loan Borrowers

Q: How do I get a personal loan for the first time?

If you are a first-time personal loan borrower, it’s important to understand the requirements for a personal loan. Most lenders base their decision of whether to grant a loan on the applicant’s credit score, debt-to-income ratio, and proof of income and employment. Maintain a strong credit score, and shop around for the best interest rates and terms on a personal loan.

Q: What is the easiest place to get a personal loan?

The easiest places to get a personal loan are online lenders, credit unions, and certain banks that offer quick approval and flexible requirements. Online lenders often have fast applications and lenient credit criteria, while credit unions may provide lower rates and easier approval for members, even with lower credit scores.

Q: What are the things to know before taking out a personal loan?

Before taking out a personal loan, you should know the requirements, terms, conditions, and interest rates of the loan. Also, ask about any fees, including an origination fee and prepayment penalty. Read the loan terms carefully and ask questions if there’s anything you’re unsure of.

Tips for First-Time Personal Loan Borrowers

Jason SteeleUpdated March 19, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

If you need money quickly, a personal loan could be one option to explore. It’s a popular choice: In 2024, 24.2 million Americans had a personal loan, according to TransUnion®, one of the three major credit bureaus. The average personal loan debt per borrower in 2024 was $11,652.A personal loan is flexible and can be used for a variety of purposes. Some common uses include paying medical bills, consolidating debt, making home improvements, and covering large purchases. If you’re considering a first-time personal loan, there are some tips and strategies that could help you with the process. Read on to learn more about getting a personal loan for first-time borrowers.

Is a Personal Loan Right for Me?

Whether to take out a personal loan for the first time may depend on your circumstances and what you plan to use the money for. A loan might be the right fit for you if you plan to put the funds toward something that might improve your financial situation, such as a personal loan for home improvement that could increase the value of your property. A personal loan could also be a good choice if you can get a more favorable interest rate than you could with other types of lending products. And it’s worth noting that one of the benefits of getting a personal loan is that it could help strengthen your credit as long as you consistently make your payments on time.However, if you need money for something like medical expenses or a new car, you may want to consider other borrowing options. Some medical providers offer financing that may have better terms than a personal loan, and auto loans typically have lower interest rates than personal loans do. When you are deciding whether a first-time personal loan is right for you, make sure you are aware of the advantages and disadvantages of personal loans. Carefully weigh all the pros and cons.

5 Tips for First-Time Personal Loan Borrowers

These strategies could help as you’re applying for a personal loan.

1. Find Out the Loan Requirements

If you are a first-time personal loan borrower, knowing the personal loan requirements is vital. Most lenders base their decision of whether to approve a personal loan on the applicant’s credit score, debt-to-income ratio, and proof of income and employment.

2. Maintain a Good Credit Score

Having a good credit score is one of the most important things you can do to improve your chances of getting approved for a personal loan. Paying your credit card bills on time and in full each month may help strengthen your credit over time. You should continue to monitor your credit history, as well. You can request a free credit report from the major credit bureaus. If you spot any inaccuracies on the report, notify the credit bureau.

3. Shop Around

Naturally, you want to find a personal loan with the lowest interest rate. Rates on personal loans can range from 5.99% to 36% or more, so the rate you can get will likely help determine how much you’ll pay over the life of the loan. You can compare top personal loans to help find a rate that’s best for you.Recommended: Average Personal Loan Interest Rate

4. Understand the Loan’s Terms and Conditions

When you’re applying for a loan, make sure you know the interest rate and repayment term. Look for any fees such as an origination fee and prepayment penalty, which could end up costing you more in the long run. Some personal loans also require collateral, which you’ll want to know upfront.

5. Make Sure You Really Need a Personal Loan

Borrowing money comes with risks. Is the purchase or expense you’re borrowing for worth it? Make sure you have a solid plan in place for repaying the loan and that the monthly payments won’t leave you financially stretched.

Getting a Personal Loan With Bad Credit

Obtaining personal loans with no credit or bad credit can be difficult, but it is possible. One method you could consider is using a cosigner on a personal loan. This can help improve your chances of being approved, especially if your cosigner has good credit. However, choose this option only if you will be able to make your monthly payments. If you don’t repay the loan on schedule, it can negatively impact your cosigner’s credit score. Some lenders offer credit builder loans, which you may be able to qualify for with bad credit. With these loans, your monthly payments are placed in a bank account and reported to the credit bureaus, and they may help build your credit. However, you won’t get access to the funds you’re borrowing until the loan is paid in full, including the interest.There are also personal loans for bad credit. These include secured loans that require an asset as collateral to back them. Because these loans involve less risk to the lender, you may be able to qualify even if you have bad credit. However, if you fail to repay the loan, the lender can take your asset. Another type of loan for bad credit is a payday loan, which should be avoided unless absolutely necessary. Payday loans often have extremely high-interest rates and very short repayment terms, and you could end up getting caught in a cycle of debt.

Finding the Right Personal Loan Lender

You can apply for a personal loan in person at a bank or credit union, or online with an online lender. Online personal loans may have different interest rates, repayment terms, and fees than in-person loans. Compare multiple offers from different lenders. Look at the costs, terms, interest rates, and any fees to find the one that best matches your needs.

Personal Loans With Lantern

Applying for a personal loan as a first-time borrower might seem overwhelming, but Lantern by SoFi can help. With just one simple application, you’ll be connected to top lenders in our network, allowing you to find a loan with rates and terms that work for you.Check your rate and compare offers with Lantern.

Frequently Asked Questions

How do I get a personal loan for the first time?

What is the easiest place to get a personal loan?

What are the things to know before taking out a personal loan?

Photo credit: iStock/gorodenkoff

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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