Requirements for a Personal Loan

Personal loans are generally easy to get, if you're not in the market for too much money. Most lenders are going to limit you to around $5,000, because the loan is considered "unsecured." This means that the loan is not being guaranteed by anything more than your promise to repay, as opposed to an equity or car loan, in which your home or automobile serves as collateral.

Identification

You will need all your personal information. Usually your drivers license will be sufficient, but you will also be asked for your social security number. This information is used to run a credit report, to check your previous payment history with other lenders as well as how much you currently owe on other debts. Most lenders are looking for a credit score of 660 or higher, but you can find some lenders out there willing to accept a lower score in exchange for charging you a higher interest rate.

Employment Information

You must prove to the lender that you are currently employed by providing at least two of your most recent pay stubs. This will help the lender determine your "debt-to-income" ratio. Your existing debt is combined with the prospective new loan payments you would be making and calculated against your income to verify your ability to pay.

Tax Information

You must also bring at least a year's worth, sometimes two, of W-2's from your prior tax returns. This enables the lender to see a work history, proof that you are paying your taxes and, again, further evidence of your ability to repay the loan.

Bank Statements

Your lender may also want to look at the past couple months of your bank activity, to verify that you are making payments to your other creditors. They will also be checking for any overdraft activity, making sure you do not have a habit of overextending yourself by writing checks before payday.

A Few Words of Advice

Be sure to check with your local banks first. While their lending requirements may be stricter, their interest rates will be lower than an independent lending institution. The rate will still be higher than for an auto or home loan, but it will not come close to what an outside lender may charge. Sometimes the rate can almost double the amount of your loan by the time its repaid. Usually this is because you are considered high risk, if you cannot get a bank loan. If you are right on the borderline, it will be worth your time to try to negotiate a lower rate with the independent lender. The banks are pretty rigid and unable to approve loans even if your credit score is one point lower than their required minimum. If you have to go somewhere else, you have nothing to lose by trying to work out a better rate.