Prequalifying for a personal loan allows you to compare rates between various lenders without hurting 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.
What is prequalification on a personal loan?
Prequalifying 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 does not affect your credit score because it is not visible to lenders on your credit report, unlike a hard credit inquiry. Lenders also use personally identifiable information such as your Social Security number and annual income to determine eligibility and pre-qualified rates.
It is important to note that prequalification is not the same as loan approval. The offer you receive through prequalification is not a guarantee, but an estimate of the terms you may be entitled to based on your creditworthiness. You can use pre-qualified offers to compare lenders before submitting a formal application, which requires a strong credit application.
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 lenders provide prequalification through an online application with a soft credit application. However, some may require a hard credit inquiry during the application process.
Be sure to check the type of application you are submitting before proceeding. 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 browse our list of the best personal loans to find lenders that offer prequalification.
Step 2: Fill out the online pre-qualification form
To request prequalification online, look for the online form for the personal loan on the lending institution’s website. This is where you’ll enter personal and financial information, such as:
- First name
- Date of birth
- Social Security number
- Address
- Telephone number
- Email address
- Employment status
- Annual income before taxes
Make sure your prequalification application contains accurate information. This will reduce the chances of discrepancies between the prequalification and the official terms of the loan, thus allowing you to more accurately evaluate the credit you are likely to be offered.
Additionally, you may need to specify the purpose of the loan, which could be to pay off credit card debt, finance home improvements, pay medical bills, or buy a car.
Step 3: consent to a subsidized credit request
To proceed with the online application process, you must agree to a subsidized credit application. This is typically done by checking a box at the end of the online form. Remember that an application for easy credit will not have a negative impact on your credit score.
Along with the information you provide, a soft credit application provides the lender with detailed information about your creditworthiness, including your credit score, repayment history and debt-to-income ratio. This helps them evaluate your ability to repay the loan.
By checking this box, you also agree that the creditor may contact you via text message, phone call, email, or postal mail. You can opt out of marketing communications later by contacting the lender directly.
Step 4: Review your pre-qualified personal loan offers
When reviewing prequalified personal loan offers, consider the following factors:
- Annual Percentage Rate (APR) – The total interest you will 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.
- Commissions – Find out if the lender charges an origination fee to process the loan. Also look for late payment penalties.
- Financing time – Most personal loans are available within a few business days of finalizing the loan. However, some lenders offer same-day financing.
- Loan duration – The longer the term of the loan, the more you will pay in interest. On the other hand, longer loan terms mean lower payment amounts than shorter loan terms.
- Refund Terms – Determine whether payments are weekly or monthly and which payment methods are accepted.
For more help evaluating loan options, read how to compare personal loan offers.
Step 5: Apply for prequalification with other lenders
Just as you should seek a second medical opinion for your physical well-being, you should also do so for your financial well-being. Don’t settle for the first prequalified loan offer you receive without checking elsewhere. Different lenders may offer more favorable options, including better APRs, loan terms, and potential discounts.
Step 6: Modify your loan application as needed
If you are unhappy with the pre-qualified offers you receive, consider changing your desired loan amount or repayment terms. Applying for a lower loan amount, for example, could result in a change in your interest rate and monthly payment. You can use a personal loan calculator (many lenders offer these online) to see how changes to your application might affect your terms.
If you are still not satisfied with your pre-qualified offers, please 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 about 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.
How to Prequalify for a Personal Loan FAQ
Should I prequalify for a personal loan?
Prequalifying for a personal loan allows you to compare offers without hurting your credit score. A pre-qualification will tell you if you qualify for the loan and give you an idea of the potential interest rate and loan terms.
What is the difference between prequalification and preapproval?
Prequalifying for a personal loan involves a light credit inquiry 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 happens if I am not eligible 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 stringent creditworthiness requirements but requires collateral in the form of valuable personal property. You could also try adding a cosigner with a solid credit history to increase your chances of approval. Finally, you can work to improve your financial situation until you have good to excellent credit, then reapply.
Can I be denied a loan after prequalification?
Yes, it is possible that you may be denied a loan after prequalification, especially if the personal financial information you provide on your application is inaccurate or if the lender has changed its terms. Remember, qualifying for a loan is not the same as loan approval. An offer may change or be canceled based on further assessment of your creditworthiness.
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