Personal loan application checklist: documents, credit checks and funding timeline

The order of operations

Most of the cost and credit damage in personal loan shopping comes from doing things in the wrong order. The sequence that protects you: check your own credit reports, prequalify with several lenders, compare the offers on APR and total cost, formally apply with one, read the written disclosures, then sign. Each step below says which credit check it involves and what you should have on hand.

Documents and information to gather

Lenders set their own document lists, so ask each one before you formally apply. What any lender needs is enough to verify what you state on the application. The CFPB's description of a mortgage application shows the pattern: you give your income, and your Social Security number so the lender can check your credit, and when you move forward the lender may ask for additional information and documents to verify what you already submitted. [7] Gathering proof up front keeps that verification step from delaying the loan.

List every income source. The CFPB says lenders are not allowed to discount or refuse to consider income from part-time employment, an annuity, pension or other retirement benefit, or public assistance programs such as Social Security, SSI, SSDI, unemployment compensation, TANF and SNAP, though they may consider the amount and whether it is likely to continue. [8] Bring documentation for each one, not only your main paycheck.

• Government-issued photo ID and your Social Security number.
• Proof of each income source you list: recent pay records, benefit award letters, pension or annuity statements. [8]
• A list of current monthly debt payments: rent or mortgage, car loan, student loans, card minimums.
• Bank account and routing numbers for the deposit, and for autopay if you choose it.
• For debt consolidation: account numbers and payoff amounts for each debt you plan to pay off.
• Your own credit reports, reviewed for errors before you apply.

Soft pulls, hard pulls and why shopping windows may not save you

The CFPB says soft inquiries, including your own requests for your reports, do not affect your credit scores, while hard inquiries usually follow an application and will affect them. [1] For personal loans specifically, Experian says prequalification typically involves a soft inquiry, and personal loan lenders do a hard credit pull when you formally apply. [2] myFICO says that for most people one additional inquiry takes less than five points off FICO Scores, though the effect can be larger with few accounts or a short history. [9]

The rate-shopping shield is narrower than many borrowers assume. myFICO describes grouping multiple inquiries into one for loans that commonly involve rate shopping, such as mortgage, auto and student loans, within a 14-day span on older FICO versions and 45 days on newer ones. [9] Experian's rate-shopping exception lists only mortgage, auto and student loans. [2] Neither says personal loan inquiries are grouped, so treat each formal personal loan application as its own hard inquiry. Use soft-pull prequalification to compare, and apply formally to one lender.

Comparing offers before you apply

A prequalified rate is an estimate, not a promise: the CFPB says lenders use prequalification and preapproval differently and neither is a guaranteed loan offer. [3] Line the offers up on the same loan amount and term, and compare APR to APR rather than APR to interest rate: the CFPB says the APR is the interest rate plus additional lender fees, such as origination charges and other fees charged when the loan is made. [11] Our APR guide explains the difference, and our fine-print guide shows how an origination fee can shrink the cash you actually receive.

Worked example: two lenders prequalify you for $10,000 over three years. Lender A quotes a lower interest rate but deducts a fee from the proceeds; Lender B quotes a slightly higher rate and no fee. If you need the full $10,000 in hand, Lender A's offer may require borrowing more to net the same cash. Ask each lender for the amount financed, the APR and the total of payments for your exact scenario before choosing which to formally apply with.

From approval to funding: what has to happen

After you submit a completed application, Regulation B requires the lender to notify you of its action within 30 days. If it takes adverse action, the written notice must give specific reasons or tell you that you can request them within 60 days. [4] Ask for the reasons; they tell you what to fix before the next application.

If you are approved, the lender must give you its Truth in Lending disclosures clearly and conspicuously in writing, in a form you can keep, before consummation of the loan. [5] Those disclosures include the amount financed, finance charge, APR, payment schedule, total of payments, whether there is a prepayment penalty or finance charge rebate, late payment terms and any security interest. [6] Compare each figure with the offer you chose. Funding speed is lender-specific, so ask when the money will reach your account and when the first payment is due.

Final checklist before you sign

If you are borrowing to pay off cards, compare the loan against a balance transfer first; our personal loan versus balance transfer guide runs that math.

• Pull and review your credit reports before any application. [1]
• Prequalify with several lenders using soft inquiries; confirm each lender says it is a soft pull. [2]
• Submit one formal application; do not assume multiple personal loan applications count as one inquiry. [2][9]
• List all income sources, including benefits and part-time work, with documentation. [8]
• Match the disclosure's amount financed, APR and total of payments to the offer you accepted. [6]
• Find the prepayment line: is there a penalty for paying early? [6]
• If denied, request the specific reasons within 60 days. [4]
• Be wary of consolidation offers that look too good: the CFPB warns some companies are debt settlement firms charging up-front fees. [10]