Documents required to apply for a personal loan

Before obtaining a personal loan, you'll need to complete a series of documents. (iStock)

An all-too-familiar scenario arises: your car breaks down and you need money to fix it. Or your best friend announces her engagement and you need money to fund the trip to the wedding, shower, and bachelorette party. Perhaps your credit card payments have become too much and you’d like to consolidate in order to pay off debt this year.

The solution to every scenario above could be taking out a personal loan, but before taking on more debt, it’s important to know how to apply, and how to get approved.

How do I apply for a personal loan?

When considering a personal loan, the first step is to check your own credit to get an idea of the score you’re working with. Many personal loan lenders require a minimum credit score, and this minimum might be higher than you think. Knowing your score will help you choose the lender working within your current credit demographic.


The second step is to shop around for the best interest rate. It’s now easier than ever to rate shop multiple lenders via online aggregators. These aggregators take basic information and use it to help you compare loan rates across many financial institutions, often within a few minutes.

Shopping is a crucial step in the personal loan process as the lower the interest rate, the more money you’ll save on paying interest on the loan, so be sure not to skip this step.

What documents are required?

“The initial application to see what offers a consumer is eligible for is based on a 'soft credit' pull and information like your income, requested loan amount and loan purpose,” said Raed Khawaja of Even Financial. “When the consumer selects their personal loan offer then they will finalize with their chosen lender on the lender’s site.” Traditionally, this is the point in the process when applicants are asked to submit documentation for final verification.

Since most personal loans are a form of unsecured debt, you do not have to put down collateral (like your house or your car) in order to receive the funds, but you’ll have to provide verifiable proof of income, such as your most current W2.


“For the W2 employee, the documents required include an application with your name, address, social security, date of birth, and employment history,” added Keith Dragisich, a personal lending expert with 16 years of industry banking experience. “Most lenders also require 30 days of paystubs.”

But what about those who don’t have traditional 9-5 employment or work solely off of commission? “For straight commission, we would take the last two years of W2 income and average it to come up with the gross monthly income amount to use to underwrite the loan,” Dragisich added. “For a business owner, we do the same but use their tax returns to calculate it based off the last two years to come up with their gross monthly income.”

What if my credit score is too low?

Don’t let low credit keep you from applying for a personal loan. You may be denied for a personal loan, but often, many lenders will ask for additional documentation from low-credit applicants. “Such additional documents could include bank statements, employment and credit history length, expenses and further information on additional debts,” Khawaja explained.

Keep in mind, however, having a low credit score may mean you’re unable to qualify for a personal loan with a low enough interest rate to make the loan more advantageous than other forms of credit. Instead, it may be worth it to wait and work on increasing your score or adding a co-signer to the loan application to qualify for a lower rate.