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Personal Loans

How to Prequalify for a Personal Loan

Prequalification for a personal loan allows you to compare rates across various lenders without harming your credit score. Through a soft credit check, you can view your estimated loan rate and repayment terms. This information helps you narrow down your options before officially applying for a personal loan, which involves a hard credit check.

Read on to learn more about prequalified personal loans, including a step-by-step guide on how to prequalify for a personal loan.

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What is prequalification on a personal loan?

Prequalification on a personal loan gives borrowers an idea of their potential annual percentage rate (APR) and loan terms. A prequalification involves a soft credit pull, which doesn’t impact your credit score because it isn’t visible to lenders on your credit report, unlike a hard credit inquiry. Lenders also use personal identifiable information like your Social Security number and annual income to determine eligibility and prequalified rates.

It’s important to note that prequalification is not the same as loan approval. The offer you receive through prequalification is not a guarantee, but instead an estimate of the terms you could be eligible for based on your creditworthiness. You can use prequalified offers to compare lenders before submitting a formal application, which requires a hard credit inquiry.

How to prequalify for a personal loan

Prequalifying for a personal loan is a quick process that can be done entirely online. Read on for a step-by-step guide to personal loan prequalification.

Step 1: Choose a lender that offers prequalification

Most personal loan lenders provide prequalification through an online application with a soft credit inquiry. However, some may require a hard credit inquiry during the application process.

Be sure to verify the kind of application you’re submitting before moving forward. This information should be clearly available on the lender’s website. If you don’t see the information you need, contact a representative.

You can also review our list of the best personal loans to find lenders that offer prequalification.

Step 2: Fill out the online prequalification form

To apply for online prequalification, look for the online form for a personal loan on the lender’s website. This is where you’ll enter personal and financial information, such as:

Name
Date of birth
Social Security number
Address
Phone number
Email address
Employment status
Annual income before taxes

Make sure that your prequalification application contains accurate information. This will lower the chances of discrepancies between your prequalification and the official loan terms, thereby enabling you to more accurately gauge the credit likely to be offered.

Additionally, you may need to specify the purpose of your loan, which could be to pay down credit card debt, fund home improvements, pay medical expenses or purchase a car.

Step 3: Consent to a soft credit inquiry

To proceed with the online application process, you must consent to a soft credit inquiry. This is typically done by checking a box at the end of the online form. Remember that a soft credit inquiry will not negatively impact your credit score.

Along with the information you provide, a soft credit inquiry gives the lender insight into your creditworthiness, including your credit score, repayment history and debt-to-income ratio. This helps them assess your ability to repay the loan.

When checking this box, you also consent for the lender to contact you via text message, phone call, email or regular mail. You can opt out of marketing communications later by contacting the lender directly.

Step 4: Review your prequalified personal loan offers

When reviewing prequalified personal loan offers, consider the following factors:

Annual percentage rate (APR) - The total interest you’ll pay on the loan, including fees.

Discounts - Some personal loan companies offer a discount for setting up automatic payments from your bank account, also known as autopay.

Fees - Find out if the lender charges an origination fee to process the loan. Look for late payment fees, too.

Funding time - Most personal loans are available within a few business days of finalizing the loan. However, some lenders offer same-day funding.

Loan term - The longer your loan term, the more you’ll pay in interest. On the other hand, longer loan terms mean lower payment amounts compared to shorter loan terms.

Repayment terms - Determine whether payments are weekly or monthly and what methods of payment are accepted.

For further help in evaluating loan options, read up on how to compare personal loan offers.

Step 5: Apply for prequalification with other lenders

Just like you should seek a second medical opinion for your physical wellbeing, you should also do so for your financial wellbeing. Don’t settle for the first prequalified loan offer you receive without checking elsewhere. Different lenders may provide more favorable options, including b better APRs, loan terms and potential discounts.

Step 6: Edit your loan request as needed

If you aren’t happy with the prequalified offers you receive, consider adjusting your desired loan amount or repayment terms. Requesting a lower loan amount, for example, could result in a change to the interest rate and monthly payment. You can use a personal loan calculator — many lenders offer these online — to see how changes to your request could affect your terms.

If you still aren’t satisfied with your prequalified offers, contact customer service to discuss your options.

When you’re ready to formally apply for a loan, refer to our guide on how to get a personal loan. It includes details on the documents you’ll need to gather (e.g., tax returns, pay stubs, bank statements), how to check your credit score with the three major credit bureaus and other relevant information.

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How to prequalify for a personal loan FAQs

Should I prequalify for a personal loan?

Prequalifying for a personal loan allows you to compare offers without hurting your credit score. A prequalification will tell you if you’re eligible for the loan and give you an idea of your potential interest rate and loan terms.

What is the difference between prequalify vs. pre-approval?

Prequalifying for a personal loan involves a soft credit pull to view potential rates. In contrast, the pre-approval process is more rigorous and is commonly used for mortgages, auto loans and credit cards.

What if I don’t qualify for a personal loan?

If you don’t qualify for a personal loan through the prequalification process, you can apply for a secured loan, which typically has less rigid creditworthiness requirements but requires collateral in the form of valuable personal assets. You could also try adding a co-signer with a strong credit history to boost your chances of approval. Lastly, you can work to improve your financial situation until you have good to excellent credit, then apply again.

Can I be denied a loan after prequalification?

Yes, you can be denied a loan after prequalification, especially if the personal finance information provided in the application is inaccurate or if the lender has changed its terms. Remember, qualifying for a loan isn’t the same as loan approval. An offer can change or be rescinded based on further evaluation of your creditworthiness.

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