Guide to Personal Loan Qualifications

Getting a personal loan may be a great option for those who need to fund a large expense at a lower interest rate than other forms of debt, such as a credit card. It would be nice to borrow as much as you want, when you want, but lenders need some convincing to ensure they’ll get their money back (with interest).

When applying for a personal loan, understanding the eligibility requirements is crucial to improving your chances of approval. While requirements for loans may vary from lender to lender, there is a list of common factors that each considers. Take a look at what they are so that you’re as prepared as possible when applying for a personal loan.

What Is a Personal Loan?

A personal loan is a type of debt that borrowers can use for a variety of purposes, including:

• Home renovations

• Emergency expenses

• Paying off medical bills

• Business expenses

• Debt consolidation

• Travel

Personal loan interest rates are lower than credit card interest rates, on average, according to Federal Reserve data.

A personal loan can either be secured or unsecured. With an unsecured loan, you don’t need to put up any collateral to secure the loan. You can find unsecured personal loans from most financial institutions, such as a bank, a credit union, or an online lender.

Recommended: What Are Personal Loans & Their Uses?

5 Typical Personal Loan Requirements

How lenders qualify applicants and the weight of importance on their requirements varies. Below are some of the typical personal loans requirements.

1. Credit Score

National Average Personal Loan Rates by FICO^® Score, as of September 2026 

A key factor lenders consider when considering whether to approve applications for personal loans is the applicant’s credit score. In most cases, lenders tend to approve loans with more competitive rates for applicants with higher credit scores. That’s because a credit score is an indicator of whether an applicant is responsible with credit. The higher it is, the less risky lenders perceive you to be.

In many cases, lenders are more stringent with unsecured loans thansecured loans. If you’re someone with a short credit history or low credit score, lenders may not readily approve you. Even if you qualify for a loan, it may be at higher interest rates and include origination and other fees.

Recommended: What Is a Passbook Loan?

2. Origination Fee

Some personal loan lenders charge an origination fee, which is used to cover the cost of originating, or processing, your loan. Typically, you’re charged a percentage of your loan amount, ranging from 1%-10%.

For example, if you borrowed $15,000 and were charged a 2% origination fee, you would pay $300.

Lenders usually give you a choice whether to pay for the fee separate from the loan, deduct it from the loan proceeds, or include it in the balance of your loan. If included in the balance of the loan, it accrues interest just as the principal amount accrues interest.

Origination fees can add up, so be sure to shop around to avoid this fee if possible or try to choose a personal loan with the lowest origination fee.

3. Collateral

Collateral is an asset or property whose value is used as a guarantee for a loan. In other words, a borrower is guaranteeing payment in the form of the collateral in the event they can’t pay back the loan. In case of default, the lender has the legal right to recoup its losses by seizing the asset or property.

Secured personal loans require collateral, whereas unsecured loans don’t. With a tangible asset, lenders will take its value into consideration as part of a loan application.

When deciding on the type of loan, consider whether you want to risk losing your property or asset for a secured loan in exchange for a potentially lower interest rate.

Types of Collateral for a Personal Loan

Here are some assets that may serve as collateral for personal loans:

• Real estate

• Cars

• Stocks 

• Bonds

• Jewelry

• Fine art

• Antiques

• Deposits in a savings account

4. Proof of Income and Employment

In addition to assessing whether you’re responsible with credit, lenders want to see that you have adequate income to pay back your loan. Proving how much you make can affect the loan term and interest rate you qualify for.

Income verification will vary depending on the lender’s requirements, but it typically involves providing the lender with pay stubs, a federal W-2 form, or bank statements, and the lender may contact your employer to verify the information you provide.

5. Debt-to-Income Ratio (DTI)

Debt-to-income ratio compares your gross monthly income to your monthly debt payments. Lenders usually prefer a lower DTI since it shows that you’re not stretched too thin financially and can afford to take on more debt.

Calculating Debt-to-Income Ratio

To calculate your DTI, take your total monthly debt payments and divide it by your gross monthly income. For example, if your gross income is $5,000 per month and you pay a total of $1,000 toward a combination of credit card and student loan debt, your DTI would be 20%.

Typical Personal Loan Documents

When you’re ready to apply for a personal loan, lenders may ask for some documentation to confirm details about your identity, employment, and residence.

Loan Application

Applicants generally must submit a loan application to start the lending process. This formal document asks for basic information such as your full name, address, Social Security number, desired loan amount, and the loan’s purpose.

Depending on the lender, you may be asked to submit a paper or electronic application. Lenders of online personal loans may offer the opportunity to go through the entire application process online, while some may ask you to speak on the phone with a representative before finalizing their decision.

Recommended: Why Your Personal Loan May Have Been Denied

Proof of Identity

Applicants typically need to provide two types of government-issued ID to prove that they are a U.S. citizen (or a permanent resident if it’s part of the lender’s eligibility criteria) and that they meet the age requirements.

Lenders typically accept the following types of ID:

• State-issued ID

• Driver’s license

• Certificate of citizenship

• Passport

• Military ID

• Birth certificate

Employer and Income Verification

One of the main requirements of lenders is for borrowers to have enough income to pay back their current and new debts. Lenders may ask for proof verifying your employment and income, such as a pay stub, a tax return, bank statements, a federal W-2 form, and your employer contact details.

Recommended: What Are the Consequences of Lying on a Personal Loan Application?

Proof of Address

Lenders may want to verify that you’re in a stable living situation. Not having an address could signal to a lender an inability to pay your loan. Plus, providing a proof of address ensures lenders can find you in the event you default on your loan. 

In general, acceptable documents to prove your address include a copy of your rental agreement, your mortgage statement, a current utility bill, your home, rental, or auto insurance bill, or your voter registration card. The document will need to include your name and physical address.

Can You Get a Personal Loan While Unemployed?

Yes, you may be able to get a personal loan while unemployed. Lenders may have certain personal loan qualifications, but employment is not necessarily one of the requirements. If you are unemployed but have annual income from other sources, such as alimony or child support, you may qualify for personal loan options.

Applying for a Personal Loan

Before applying for a personal loan, there are steps to take so you may get the rates and terms most suitable for your financial profile. Ensuring you have a stable income and a high credit score may help qualify you for more favorable rates and terms.

Stable Income

If you’ve had gainful employment for the past few months (or even a year or more is great), you may be able to prove to lenders you have sufficient income to pay back your debts.

Self-employed individuals will want to look at their bank statements and tax returns from the past few years to see whether they count as sufficient proof for lenders.

Checking Your Credit Score

Check your credit score and credit report (you can download your credit report at no cost once a week from AnnualCreditReport.com) to see what factors may be affecting your score. If you find any discrepancies in your credit report, you can file a dispute with the credit bureau that reported the information.

Failing to pay and defaulting on a personal loan can impact your credit score.

Preapproval

Many lenders have a personal loan preapproval option, which involves conducting a soft credit check that doesn’t affect your credit score. So you can shop around and customize your quotes with different lenders before picking one that’s the best fit and not worry about your credit score being negatively affected.

The Application Process

After getting prequalified, compare personal loans and select the one you want to go with. Make sure to read the fine print so that you understand the loan agreement.

Once you’ve decided on a term, rate, and monthly payment you’re happy with, gather up all required documentation to begin the formal application process. You’ll usually need to provide proof of income, employment, and address. Check with the lender for acceptable documents.

What to Do If You Don’t Meet the Personal Loan Requirements

Borrowers who don’t meet the personal loan requirements on their own merits may consider getting a cosigner or a co-borrower. Applying with a creditworthy cosigner or co-borrower may improve what your personal loan approval odds are.

Tips for Improving Your Approval Chances

Personal loan approval is never guaranteed, but here are some tips that may help improve your approval chances:

• Consider getting a cosigner or a co-borrower.

• Consider pledging collateral on a secured personal loan.

• Consider applying when you’ve built your credit score.

• Request the smallest loan amount possible that can meet your needs.

The Takeaway

While personal loan requirements vary from lender to lender, most lenders look at the applicant’s credit score, income, DTI, and collateral (for a secured loan). The more insight you have into what lenders want and what makes you creditworthy, the more prepared you may be when applying for a personal loan and the more aware of rates and terms you might be eligible for.

If you’re looking for a personal loan, Lantern by SoFi can help. With Lantern, it’s easy to review and compare personal loan options from multiple lenders. It only requires one application and there’s no obligation to you.

Compare personal loan options with Lantern.