These are some of the categories a lender will assess when considering your personal loan application.
Credit score
Your credit score is a key factor in determining if you qualify for a personal loan. That means credit scoring factors are also important. Those include:
- Payment history
- Credit utilization (how much of your available revolving credit you’re using)
- Average age of accounts
- Credit mix (a diverse mix of credit, such as credit cards and student loans, is generally preferable)
Lenders want to know that you can repay a loan and make your monthly payments on time. A history of well-managed debt can help demonstrate that you’re a responsible borrower.
If approved, the interest rate you receive can also depend on your credit score. A higher credit score can mean you’re more likely to get a lower interest rate.
Debt-to-income ratio
Lenders may also look at your debt-to-income ratio (DTI) when you apply for a personal loan. Your DTI is the percentage of your gross monthly income that goes toward debt payments. For example, it factors in:
- Credit card minimum payments
- Car loan payments
- Mortgage payments
- Student loan payments
You can calculate DTI by dividing your monthly debt payments by your pre-tax monthly income. Let’s say you make $5,000 a month (before taxes) and pay $1,200 per month toward debt. Your DTI would be .24 or 24%.
Lenders use DTI to evaluate your ability to comfortably afford new loan payments and decide whether you can take on more debt. As with credit score and payment history, lenders may use an applicant’s DTI to assess the likelihood they’ll repay the loan.
What DTI ratio do I need to get a personal loan?
In general, lenders prefer a DTI ratio of 36% or lower. The lower your DTI ratio, the better your approval odds.
Stable income
Lenders want to know if you have a stable cash flow and enough money to cover monthly payments. For this reason, they may have minimum income requirements you need to meet to qualify for a personal loan. Lenders may give the lowest APRs to those with higher incomes, though this is one of several factors.
Age
Personal loans typically have a minimum age requirement. Often, you must be at least 18 years old to qualify for a personal loan although some lenders may have higher minimum age requirements, such as 21 or 25. Confirm this requirement with your lender before applying.
Personal loan application documents to gather
Lenders may request that you attach certain documents to your personal loan application to verify your information. These documents may include:
Proof of identity
Lenders need to confirm your identity and that you meet the age requirement. Acceptable documents can include:
- Social Security card
- Birth certificate
- Passport
- Driver’s license
- Military ID
- State ID
Proof of address
You can usually use a proof of identity document as proof of address if it shows your current address. Otherwise, proof of address can also include:
- Utility bill
- Lease agreement
- Mortgage statement
Proof of income and employment status
The required documents for income and employment status may depend on your employment type (for instance, full-time employment or self-employment). However, you may need to show:
- Recent pay stubs
- W-2 form
- Tax returns
- Bank statements
- 1099 forms
How to apply for a personal loan
Before starting your application, research and compare individual lenders’ requirements so you can find the best fit for you and your current finances. It’s also important to consider the loan terms, APRs and fees. For example, some personal loans may come with late fees or origination fees, which are generally deducted from the loan amount. That means you may have to borrow a higher amount to meet your needs.
As you’re shopping for lenders, you may also take advantage of pre-qualification. That can let you gauge your approval odds and understand your potential loan terms with certain lenders. Pre-qualification involves a soft credit pull, which doesn’t impact your credit score. This can help you narrow down your options, though keep in mind that pre-qualification is not a guarantee of approval or loan terms.
Once you choose a lender, you can apply for your personal loan. You can usually complete the application online. Make sure to fill it out completely and accurately, and ensure you have all the necessary documentation ready. After you hit submit, the lender will do a hard credit check, which can have a small, temporary impact on your credit. Hard credit inquiries happen when lenders pull your credit file after you apply for new credit.
If you apply and are approved, you can typically receive your personal loan funds quickly. For example, with a Citi® Personal Loan, those with a Citi bank account can receive their funds via direct deposit as soon as the same business day. Applicants with non-Citi accounts can receive funds within 2 business days.1 Or you can choose to receive a check by mail in about 5 business days.
Tips to help improve your personal loan eligibility
There are a few things you can do to help improve your chances of being approved for a personal loan:
- Review your credit report for mistakes: Errors may lower your credit score and hurt your ability to get a loan. You can dispute errors by contacting the relevant credit bureau as well as the company that provided the incorrect information. Be prepared to provide evidence backing up your claim.
- Improve your credit: There are several ways you may improve your credit. The most important factor is maintaining an on-time payment history. The longer you can keep that up, the better it is for your credit. Other key areas you may target include paying off your revolving debt (this can help decrease your DTI ratio as well), keeping your oldest accounts open and limiting new credit applications.
- Increase your income: Increasing your earnings or seeking more stable employment may be helpful in qualifying for a personal loan. This may mean asking for a raise, looking for a new job or tapping into your skillset to start a side hustle.
Citi offers flexible, fee-free personal loans to qualified applicants. If you think you could benefit from a Citi Personal Loan, apply online today.
What if I’m denied a personal loan?
If you’re not approved for a personal loan, the lender is required to send you a notification about why your application was denied. This can help you understand any issues you may need to address, such as a low credit score or high DTI ratio. You can also request a free copy of your credit report from each of the 3 major credit bureaus. That may provide additional insight, such as which debts you may wish to focus on paying down before you apply for another personal loan in the future.
Keep in mind that adding multiple hard credit inquiries to your credit report, especially within a shorter timeframe, can have a bigger impact on your score. It’s generally best to use pre-qualification to limit applications and only apply when you’re confident about your approval odds. If you’re still having trouble getting a personal loan, it may be time to consider an alternative option.
Alternatives to personal loans
If you aren’t able to qualify for a personal loan yet, or you decide it isn’t the right option for your needs, there are other avenues you might explore:
Home equity line of credit (HELOC)
If you own a home, you may be able to tap into your home’s equity to access funds. A HELOC typically starts with a draw period, during which you can borrow up to a limit and make minimum monthly payments, that typically lasts 5 to 10 years. After the draw period ends, you enter repayment (which typically lasts 20 years). During that time, you must repay what you owe, plus interest, and you can’t borrow money anymore. A HELOC may make sense if you need ongoing access to funds.
Keep in mind that HELOCs use your home as collateral. If you aren’t able to repay what you borrow, the lender may repossess the property.
Credit card
If you have enough available credit and you can pay off the amount you plan to charge before incurring interest charges, a credit card may be a good solution to your funding needs. Another option may be to apply for a low intro APR credit card. If you can pay off the balance before the promotional period ends, you may minimize or even avoid interest charges.
P2P loan
P2P loans may be an option if your credit was the key barrier to qualifying for a personal loan. These are funded by individuals, rather than a financial institution. It may be easier to qualify for a P2P loan, though you may receive a higher APR.
Family loans
If you have family members who can help, you might want to consider asking them for a loan. Family loans can be sensitive, so it’s important to establish clear rules around repayment, including what happens if you’re unable to make a payment.
Personal loan FAQs
What credit score do I need for a personal loan?
Credit score minimum requirements vary by lender. Some lenders may accept applicants with lower credit scores, while others may have higher credit score minimum thresholds.
Is it hard to get approved for a personal loan?
It depends on the lender. Different lenders have different requirements, including minimum credit scores, maximum DTI ratios and more. Pre-qualification can help you assess your approval odds with a given lender.
What is the minimum salary needed for a personal loan?
Income requirements can vary by lender and may depend on the loan amount you’re requesting. Income consistency and the ability to repay your loan are key factors as well.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
1If you are approved for a personal loan with Citi, you can get your funds the same day with a Citi deposit account, or up to 2 business days for a non-Citi account when using direct deposit. Or, you can select to receive a check by mail in approximately 5 business days.
