What documentation is required for personal loans?

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When applying for a personal loan, the lender you choose sets the criteria for what documentation you’ll need. Fortunately, the documentation requested is usually similar across lenders. Below is a list of personal loan documents and information your lender may require.

Questions you should be prepared to answer

Come prepared to your personal loan application by thinking through your loan purpose and eligibility.

1. Why do you need to borrow this money?

While most lenders aren’t too concerned with how you’ll use the loan, understanding its purpose may help the lender recommend the best loan product for your needs. Different loan purposes may also open up different interest rates or loan amounts.

2. How much can you afford to borrow and for how long?

Ultimately, the lender will determine how much it’s willing to lend based on an analysis of your financial health and a determination of what you can afford. However, you should go into the loan process with a solid idea of the payment you know you can afford and how long you’ll need to repay it. Don’t borrow more than you need, even if you’re approved to do so. Remember, you pay the lender a fee (via interest) on every penny you borrow.

3. What’s your credit score?

Once you’ve initiated the loan application process with a lender, it will do a hard pull of your credit score. However, it’s wise to know your credit score beforehand. If your credit score is not high enough to qualify, the lender may be able to tell you that upfront.

You may be able to take advantage of a tool called prequalification. This lets you know if you’re qualified for a loan with only a soft credit pull, which won’t have any impact on your credit score.

Personal loan documents your lender may require

During the initial application and during the verification process, you may have to provide your lender with a few documents. Most of the documents can be submitted electronically.

1. Loan application

Each lender will have its own application to initiate the loan process, and this application can look different from lender to lender. For example, if you’re borrowing from an online lender, the application process is often done entirely online. If you’re borrowing from a traditional bank or a credit union, the applications can typically be completed either in person or online.

This initial application is usually basic — it will often ask for your personal information, desired loan amount and loan purpose.

2. Proof of identity

Aside from obvious reasons like identity theft, lenders must be able to verify your identity to determine if you’re a United States citizen or permanent resident and if you’re at least 18 years of age. You’ll typically need to present two forms of identification, such as:

  • Driver’s license
  • Passport
  • State-issued ID
  • Certificate of citizenship
  • Birth certificate
  • Military ID

3. Employer and income verification

Unsecured personal loans are different from many other types of loans, like mortgages or auto loans, in that there is no collateral backing the loan. This increases the lender’s risk and makes it even more important for it to verify that you have a steady source of income to repay the loan.

If you are traditionally employed, you can usually verify your income with the following documents:

  • Paystubs
  • Tax returns
  • W-2s and 1099s
  • Bank statements
  • Employer’s contact information

If you’re self-employed, you can usually verify your income with the following documents:

  • Bank statements
  • 1099s.
  • Income tax returns.

4. Proof of address

Proof of your living situation can help a lender determine how stable your lifestyle is. You can usually use one of the following:

  • Utility bill
  • Lease or rental agreement
  • Proof of insurance on your home, lease/rental or vehicle
  • Voter registration card

If you need a change of address confirmation, the U.S. Postal Service offers resources to help you change, and confirm, a change of residential address.

What if you don’t get approved for your loan?

If you don’t get approved for a personal loan, there are a couple of other options to consider:

  • Get a cosigner: A cosigner adds their name to your loan application. They agree to pay off the loan plus any additional fees in the event you default. If you have a trustworthy friend or family member with good or excellent credit, they may help you get approved for a cosigned loan. Note that your cosigner will likely need to provide the same documents as you when you both apply for the loan. If you go this route, make sure you repay it on time to avoid damaging your relationship.
  • Choose a secured personal loan: Most personal loans are unsecured, meaning they don’t require collateral like your house or car. Secured personal loans, on the other hand, are backed by collateral. If you fail to repay your loan, the lender may seize your collateral. By applying for a secured personal loan, you can reduce the lender’s risk and therefore increase your chances of approval. Keep in mind you’ll have to show documentation proving the value of the collateral and the fact you own it.

The bottom line

Applying for a personal loan doesn’t have to be stressful. Be prepared to answer questions and provide the required documentation, and you’ll likely have a smooth experience borrowing the funds you need. But don’t forget, you won’t just owe the lender the amount you borrowed; you’ll also owe all of the interest that accrues during your repayment period, so be sure to shop around for the best lender offering you the best interest rate and the lowest fees.

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