Before you apply for a personal loan, consider prequalification. You’ve probably seen invitations to do so that say something like, “Check offers with no impact to your credit score.” Many lenders also allow you to prequalify online.
Either way, prequalifying is a great way to explore personal loan offers without hurting your credit score, allowing you to shop for the best deal. It’s not a guarantee of approval, though, and you’ll still need to apply for the loan.
Here’s more about prequalifying and how to use the process to find the best personal loan for your needs.
Steps to Prequalify for a Personal Loan
The steps to prequalify for a personal loan may vary by lender, but here is what you can generally expect:
1. Complete the prequalification form. The lender will ask for some basic information, such as your name, address, income, employment details and desired loan amount. Consider how much money you need to borrow, but also think about how the loan’s monthly payment will fit into your budget. Use a loan calculator to estimate your monthly payments.
2. Wait for the soft credit check. The lender will review the information you provided and perform a soft credit check to determine your creditworthiness. A soft credit check won’t show up on your credit report or hurt your chances of getting a loan.
3. Find out if you’re approved. If you’re approved, you will receive estimated loan terms. With this information, you can compare offers to find the best terms for you. Compare the loan terms, including amount, interest rate and monthly payment. If you didn’t get an offer, try another lender that may better fit your needs.
4. Formally apply for the best loan offer. After you choose the best offer, continue to the lender’s full application to formally accept the loan offer and apply for the loan.
What Do You Need to Prequalify for a Personal Loan?
What you need to prequalify for a personal loan will depend on the lender, but you will want to be prepared with information about your income, debt and assets. Lenders will typically ask for your:
- Desired loan amount.
- Loan purpose.
- Credit score range.
- Employment status.
- Annual income.
- Monthly housing cost.
- Name and contact information.
“Give yourself as much time as possible before you prequalify for a loan,” says Rod Griffin, senior director of public education and advocacy for the credit bureau Experian.
Check your credit about three to six months before prequalifying to allow time to improve your credit if necessary, he says.
8 Lenders That Let You Prequalify for Personal Loans
Not all lenders offer a personal loan prequalification option, but many do. Consider these personal loan companies that let you prequalify to check your loan offers before you apply:
| LENDER | LOAN AMOUNTS | MINIMUM FICO CREDIT SCORE |
| Avant | $2,000 to $35,000 | Not disclosed |
| Best Egg | $2,000 to $50,000 | Not disclosed |
| Happy Money | $5,000 to $40,000 | 640 |
| LendingClub | $1,000 to $40,000 | Not disclosed |
| PenFed Credit Union | Up to $50,000 | 650 |
| SoFi | $5,000 to $100,000 | 680 |
| Upgrade | $1,000 to $50,000 | Not disclosed |
| Upstart | $1,000 to $50,000 | 300 |
Why Prequalifying for a Personal Loan Is Important
Prequalifying is an essential step in getting a personal loan because it allows you to compare loan offers without any effect on your credit. You’ll get the details of your potential loan from each lender you prequalify with, including your likelihood of approval and an estimated loan amount, interest rate and monthly payment.
“Prequalification isn’t a full application,” Griffin says. “But it can give you a good idea on where you stand and what you will be able to get when you apply.”
Prequalified loan offers give you a chance to consider the loan terms, including how the loan payment will fit into your budget, and adjust your request if necessary.
“The personal loan industry created prequalification to help drive access to credit and offer the ability for customers to have some more transparency in options,” says Tim Schlueter, vice president, head of lending and strategic partnerships at online lender Avant. “Lenders have largely adopted the strategy of allowing customers to prequalify and move forward after they’ve seen the rates and terms.”
Prequalifying for a personal loan can also tell you if you’re not ready to take on a loan. For example, your income might be too low or you need to work on your credit.
If the loan offers aren’t what you’re expecting or you can’t get any, you might need to regroup before you reapply.
Once you’ve improved your credit profile, you can try prequalifying again to see if the offers have improved. It still won’t affect your credit until you formally apply for a personal loan.
Tips for Prequalifying for a Personal Loan
Ready to prequalify? Here’s how you can increase your chances of getting the best personal loan offers:
- Know your credit. Check your credit report to understand what you’re bringing to the table, Griffin says.
- Look for “no impact to your credit” forms. Many lenders offer prequalification forms, but not all do. The form should clearly say it’s for prequalification or promise that you can check for loan offers without a hard credit inquiry.
- Choose lenders within your credit range. While some lenders don’t disclose a minimum credit score for a personal loan, many do. If your credit score is lower than the lender’s minimum, don’t bother prequalifying because you’re not likely to get approval.
- Look at the full cost and how long you’ll pay. Monthly payment might be the most important number for your budget, but be sure to review the total loan cost, including how much interest you’ll pay over the life of the loan. A low monthly payment might mean a longer term length and more overall interest.
- Be realistic about your budget. Before you take out a large personal loan, do the math to make sure you can fit the monthly payment amount into your budget.
- Use a loan marketplace. A loan marketplace can help you prequalify for multiple loan offers at once, matching you with lenders that fit your financial profile.
“Understand what your credit is, and look for a lender that specializes in lending to customers like you,” Schlueter says. “Shop around and see what options are out there, as the best may not necessarily be the first one you see.”
What to Do After You’ve Prequalified for a Personal Loan
After you prequalify for a personal loan, you are ready to apply for the best offer. But first, compare interest rates, loan amounts, monthly payments and other terms the lenders offer.
Once you’ve chosen the best loan option, go ahead and accept the offer with your full application. It should be a fairly easy process because the lender has most of the information required for approval.
You’ll need to allow a hard credit check at this point, which can have a temporary negative effect on your credit score. But prequalification reduces the odds that you’ll need more than one hard inquiry for your personal loan.
You’re not guaranteed approval for your personal loan after you qualify, but you have a good shot. The lender may ask for proof of income and assets you reported on your loan application. If you’re approved for a loan, you can arrange for the funds to be deposited in your bank account and start making monthly payments.
What to Do if You Can’t Prequalify for a Personal Loan
If you don’t get prequalified, you will want to find out why so you can improve your chances next time.
You should get an adverse action notice or letter from lenders that didn’t approve your personal loan prequalification. This document will explain why you were denied, list your credit score, and tell you how to get a free copy of your credit report.
Getting denied for a preapproved personal loan could mean you need to bring up your credit score, pay down debt or increase your income. It could be as easy as sticking with a new job for a few more months to show some more stability. If those adjustments aren’t within your reach, you might need to come back with a co-signer or co-borrower who has good credit and can help you get approved.
Try not to take the reasons for rejection personally, Griffin says.
The adverse action notice is “a tool to better understand how to improve in the future,” Griffin says. “It isn’t a no, but a not right now – and here’s what you need to do to apply in the future.”
