How to Prequalify for a Personal Loan?

If your credit card debt is piling up or if you are planning some kitchen or bathroom improvements, you can apply for a personal loan to finance your needs. 

When looking for personal loans, you may come across various lenders offering different loan terms and rates, and having varying requirements. 

This is when you should opt for prequalification to determine whether you qualify for a loan, the amount you can borrow, and what your annual percentage rate (APR) is. 

But how to prequalify for a personal loan? Continue reading to find our step-by-step guide for loan prequalification.

What Is Prequalification for a Personal Loan?

Prequalification for a personal loan is about finding out your creditworthiness. During a prequalification, you request your lender to make an initial decision about providing you a loan. It allows you to find out how much you can borrow and what APR you’ll get, based on your creditworthiness.

During a personal loan prequalification, a lender carries out soft credit inquiries, which don’t have any effect on your credit score. So you can shop around and request multiple pre-qualifications to find the best deal, without having any impact on your credit score. 

However, do note that a prequalification won’t guarantee a loan approval. It just gives you a rough idea of the rates and terms you will get. 

How to Prequalify for a Personal Loan?

What You’ll Need

To pre-qualify for a loan, you will need to fill out an application form and provide the following information:

• The amount you want to borrow
• Your personal information, including your name, contact information, Social Security number, and residential address.
• Your employment information, including your income, the employer’s name, and their contact information.
• Your intended purpose for the loan, such as home improvement or debt consolidation. 

Once you have all of this information ready, follow the steps below to pre-qualify for a personal loan:

1. Find Personal Loan Lenders

Start by researching personal loan lenders near you. You can look for online lenders or reach out to banks or credit unions offering personal loans for various needs. Shortlist at least 4-5 lenders to compare their terms and rates.

2. Request Prequalification from Your Lender

After shortlisting your lenders, you can request them for a prequalification form for you to fill out. When filling out the form and requesting prequalification, you will be asked to share your personal information, your income and employment information, your Social Security number, the amount you need, and your intended purpose.

3. Review the Terms of Use

Once you have filled out the form, your lender will ask you to accept their terms of use and also provide you with an agreement. Make sure to review the agreement and terms of use carefully. 

You should only accept the terms if the lender is performing a soft credit inquiry because a hard credit check will affect your credit score.

After agreeing to the terms, submit the prequalification application for the lender to process. They will get back to you shortly after assessing it.

Why You Should Get Prequalified

There are many reasons why you should get prequalified for a personal loan. It gives you an idea of how much money you can borrow. Sometimes, the amount you can borrow may be less than what you need. 

So a prequalification can give you a ballpark figure of how much you can borrow, depending on your creditworthiness.

A prequalification also helps you calculate your monthly payments and find your loan terms. When the lender offers you their loan terms and rates for the amount they can lend, you can calculate your monthly payments easily.

A prequalification also allows you to compare multiple rates from different lenders. It gives you a realistic idea of the APR you’ll get, depending on your credit score. So it’s always important to get prequalified before applying for a loan.

Conclusion

So that’s all, folks! Now that you know how to prequalify for a personal loan, we hope you shop around and find the best rates possible for your personal loan. Start by looking for “personal loans near me” to find multiple lenders.

If you are looking for a personal loan online, apply today at Cash in Minutes. We also accept bad credit and offer same-day funding for all personal loans.