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Personal Loan Approval Odds: Understanding Your Chances

Personal Loan Approval Odds: Understanding Your Chances
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated September 6, 2022
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There’s no guarantee that a lender will approve your application when you apply for a personal loan. There are certain factors, however, that may increase your loan approval odds.Lenders may review your credit report when determining whether to approve or deny your loan application. Applicants with bad credit may have difficulty getting approved for funding, but using a cosigner or pledging an asset as collateral may help subprime borrowers take out a loan.

Understanding Personal Loan Approval Odds

As mentioned above, there’s no guarantee that a lender will approve your application when you apply for a personal loan. Although approval is never guaranteed, having good credit and a low debt-to-income ratio may improve your chances of loan approval.Borrowers with bad credit may get approved for personal loans, but it might be difficult for subprime borrowers to get approved for large personal loans. That’s because lenders may realize significant losses if a borrower defaults on a $100,000 personal loan vs. a small personal loan.Borrowers with bad credit scores as low as 550 may qualify for $4,000 personal loans. Banks, credit unions, and private lenders can offer $4k loans. You may qualify for small personal loans if you have steady income and the means to make required repayments on the loan. Asking for a smaller loan amount may increase your chances of getting a loan.

Personal Loan Approval Odds: The Statistics

Lenders demonstrated an increased willingness to offer personal loans to subprime borrowers in the second quarter of 2022, data show. The subprime risk tier is defined as consumers with VantageScore® 4.0 credit scores between 300 and 600, according to TransUnion.Total personal loan balances reached a record $192 billion in Q2 2022, and subprime borrowers saw the largest rise in originations at 71.2%, according to TransUnion’s Quarterly Credit Industry Insights Report for Q2 2022. These statistics prove that bad credit doesn’t necessarily disqualify anyone from getting a personal loan.Lenders can implement their own underwriting standards when deciding whether to approve or deny a loan application. Some lenders may cater toward consumers with FICO® Scores above 700, but borrowers with bad credit may still qualify for personal loans in general.

Personal Loan Approval Odds for Low Credit Applicants

Consumers with bad credit may find it difficult to get approved for a large personal loan. Requesting smaller loan amounts may increase your loan approval odds.The average balance of new unsecured personal loans stood at $8,085 in the second quarter of 2022, data show. Lenders may offer personal loans ranging from $1,000 to $100,000, but the approval odds for personal loan amounts of $100k can be bleak for applicants with modest income or bad credit scores.Some of the reasons to submit a personal loan application are to apply for funds that you may use for debt consolidation, home improvement, or other purposes.If you’re paying interest on credit card debt balances, using personal loans for debt consolidation may help you save money in interest over time. That’s because personal loan interest rates may be lower than credit card interest rates for the average borrower.The average personal loan interest rates on 24-month personal loans stood at 9.41% in the first quarter of 2022 compared with 16.17% for credit cards, according to Federal Reserve data.

Tips for Improving Your Personal Loan Approval Odds

Below are several tips that may bolster your chances of getting loan approval:

Monitoring Credit Score

A consumer’s credit score can fluctuate from month to month depending on payment history and how much credit a consumer uses, among other things. Monitoring your credit score can keep you informed of your credit score number and whether it’s trending upward, downward, or remaining flat.Your approval odds for personal loan funding may increase if you apply during a time when your credit score is trending upward.

Getting a Cosigner or Joint Applicant

Getting a cosigner or joint applicant may improve your personal loan approval odds by reducing risk to the lender. Joint applicants share the responsibility of repaying the loan, while cosigners accept financial responsibility if the main borrower fails to make a required payment.

Selecting a Lender That Meets Your Requirements

Some lenders offer personal loans as low as $1,000, and some lenders offer personal loans as high as $100,000. Some lenders may offer subprime personal loans, and some lenders may cater to borrowers with good or excellent credit. Selecting a lender that meets your requirements may enhance your chances of getting loan approval.Certain personal loan tips can help you find the best financing terms for you, such as shopping around and comparing interest rates across lenders.Being prequalified or preapproved for a consumer lending product does not guarantee final approval, but personal loan preapproval can give you a head start in the process. 

Securing a Source of Income

Getting personal loans with no income verification is possible, but securing a steady income and presenting verification may uplift your chances of getting a loan. Borrowers with bad credit may qualify for a loan if they have the means to make monthly repayments on the debt.Borrowers without a steady income may find it difficult to repay loan principal and interest charges. Income can come from a variety of sources, including salaries and wages from employment, Social Security benefits, and pension payments.

Personal Loans With Lantern

If you need to borrow money, Lantern by SoFi can help you compare personal loan offers. Just provide basic information about yourself, and Lantern can guide you in the process to apply for a personal loan with the lender of your choice.
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Frequently Asked Questions

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About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and currently serves as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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