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Dear Personal Loan Adviser,
I need to borrow some money, and I’m considering doing it with a personal loan. What documents and information will the lender need from me in the loan application process?

— Ken Credit

Dear Ken,
The lender gets to decide what it needs from you in the loan underwriting process. That said, what they’re looking for is pretty universal across lenders. They’re going to want to know your credit score, and they’ll typically want to verify that you have a job. They may ask how long you’ve been living at your current address.

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Your credit score is based on the information in your credit reports. A FICO credit score is based on 5 factors, in this order of importance:

  • Your payment history.
  • The amount of money owed.
  • The length of your credit history.
  • The amount of new credit.
  • The types of credit in use.

Job verification needed

Since personal loans are unsecured, meaning they don’t have any collateral backing them, verification of employment is important so that the lender knows you have a source of income to repay the loan.

In general, the less documentation and information required, the more expensive the loan. I think it’s a good idea to review your credit reports and credit score before applying for a loan. The myBankrate feature lets you review your TransUnion credit report and see your VantageScore credit score for free.

The peer-to-peer lenders like Prosper, Lending Club and Avant don’t generate a hard inquiry when you apply for a personal loan. Instead, they do what’s called a soft inquiry, which doesn’t impact your credit score when you apply. Conventional lenders are more likely to do a hard inquiry.

Multiple hard inquiries will make you look desperate for credit, and lenders don’t like lending money to desperate people.

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