What documents are required for a personal loan?

When you apply for a personal loan, lenders will ask for several documents to verify your personal and financial information before making a decision. Some lenders set specific requirements for application and eligibility, but most require similar documentation.

Knowing what documents you need and having them ready before you apply can increase your chances of approval and get you funds faster.

What do I need to apply for a personal loan?

After you start the initial application process, lenders will ask for documents to verify all the information you have provided. This helps determine the personal loan rates offered and your ability to repay. This usually includes proof of your personal information to confirm your identity and financial information. Usually, most of the documentation can be submitted electronically through a portal on the lender’s website.

1. Application form

All lenders require you to fill out an application form to get a loan. If you borrow from an online lender, the process is entirely online. If you apply for a personal loan at your local bank or credit union, you may be able to complete the application in person with a bank representative.

The application will likely look slightly different for each lender, but typically requires information such as the following:

• Your full name.
• Contact information.
• Address history.
• Birth date.
• Social security number.

You will need to select a loan amount, answer questions about the purpose of your loan, and provide financial information about your monthly income, bills, and debts.

2. Proof of identity

Lenders need to be able to verify your identity to approve your loan. Two forms of identification are usually required. Acceptable documents include:

• Birth certificate.
• Proof of citizenship.
• Driver’s license.
• Military ID.
• Passport.
• Social security card.
• Identification card issued by the state.

The lender must be able to read your ID – take a clear photo with your smartphone or use a scanner to avoid delays.

3. Employer and income verification

Unsecured personal loans primarily use your income to determine how much you qualify for. Since lenders don’t require collateral for the loan, you’ll need to prove you have a regular, verifiable income to get approved.

If you are in a regular employment relationship, you can prove your income with some documents, including:

• Payroll statements.
• tax returns.
• W-2 and 1099.
• Bank statements.
• Employer contact information.

If you are self-employed, you may need some or all of the following documents:

• Bank statements.
• 1099s in the last two years.
• Tax returns for the last two years.

If you work for a regular employer, you should be able to access your pay stubs and tax forms through your payroll provider’s online database. You can also contact your human resources or payroll department. If you’re self-employed, you may need to work with your accountant or other tax professional – they may be able to help you provide the necessary tax forms.

4. Proof of address

You’ll also need proof of your current address and how long you’ve lived there. You may not qualify if you’ve moved frequently or just moved to a new area. While some lenders require specific documentation, you can usually use one of the following:

• electricity bill.
• Rental or lease agreement.
• Mortgage settlement.
• Proof of insurance for your home or vehicle.
• Voter registration card.
• Receipt for property tax.
• Bank or credit card statement.

If you need confirmation of your address change, the U.S. Postal Service has resources to help you confirm a change in your residential address. The quickest and easiest way to do this is online, but you can also go to your local post office and fill out a form in person.

Additional information lenders use to approve your loan

When you apply, lenders consider several factors when approving your loan and determining the interest rate offered to you.

• Credit-worthiness.
• Credit purpose.
• Monthly expenses.
• debt-to-income ratio.

What if you don’t have the required documents?

You may not be completely out of luck. Depending on what is missing, the lender may offer alternative verification methods.

For example, if you don’t have pay stubs handy, they may contact your employer directly to confirm your income information or check your bank statements for evidence of electronic deposits. Some lenders also allow you to sync your bank information when you request electronic verification of your income information without requiring you to submit additional documentation.

However, lack of the required documents can lead to rejection in some cases. Be sure to inform the lender immediately if you are missing documents to clarify if there are any ways to get around the problem.

What happens if your loan application is rejected?

If your personal loan application is rejected, there are some steps you can take to improve your chances the next time you apply.

Get a co-signer

A cosigner – usually a family member or close friend – also assumes legal responsibility for your loan by signing when you apply. Adding a cosigner who meets eligibility requirements can increase your chances of approval or help you qualify for a higher loan amount.

Keep in mind that if you miss a payment or fall behind on the loan, your co-signer’s credit score will be affected.

Choose a secured personal loan

Secured personal loans are secured by collateral, such as a boat, car, house or RV. You must provide documentation as proof of ownership and the lender must determine the value of the asset in order to provide a loan on it.

By applying for a secured personal loan, you can reduce the lender’s risk and increase your chances of approval, as the lender can seize your assets if you are unable to repay your loan. You may even get a lower interest rate, which will allow you to pay a lower rate and qualify for a higher loan amount.

Work on your creditworthiness

If you are not currently eligible for a personal loan and do not urgently need the funds, you should work on your credit score. Paying off your credit card debt is one of the best ways to quickly improve your credit score. This will lower your credit utilization ratio, which is a major factor in how high your credit score is.

As your score improves, your chances of being approved increase, and you’re more likely to get a good loan rate, which can save you hundreds or even thousands in interest payments.

Consider a credit card

A credit card is designed for small, everyday expenses, so it may not be the best choice if you need to cover a large expense. However, for ordinary projects under $1,000 that you can pay off quickly, a credit card may be a better option. The applications require similar documents and information, and it may be easier to find a credit card that meets your needs.

The conclusion

Gathering the information and documents you need before applying for a personal loan can save you time and avoid potential delays in obtaining funding. Make sure all of your paperwork is legible and submit documents as soon as possible to speed up the process.

Not all lenders have the same requirements, so be sure to read up on the general documentation criteria before applying. Being prepared will increase your chances of approval and get your money faster.