When applying for a personal loan, being prepared with the right documents can make the process faster and smoother. Whether you’re looking to consolidate debt, finance a major purchase, or cover an unexpected expense, knowing what paperwork is required is essential for a successful application.
Understanding the loan application process ahead of time can help you avoid unnecessary hurdles and secure the funds you need with confidence. This guide will walk you through the documents you need and provide tips to avoid common mistakes that can delay approval or even lead to denial.
Personal Loan Prequalification Documents
Most lenders will allow you to prequalify for a loan without pulling your credit. That’s good news because pulling credit in response to a loan application, which is called a “hard pull,” lowers your credit score by three to five points every time it is done.
Lenders prequalify you by generating a “soft pull” of your credit report, similar to the process you use to check your own credit.
They will ask you questions about your bank balances, income, and debts. If you choose to proceed with your application, they will estimate your rate and loan limit.
So your first step requires you to provide accurate information but no paperwork.
Prequalification is you and the lender getting to know each other — the lender decides if it is willing to finance you, and you decide if the rate and terms you’re offered are acceptable.
It only takes a few minutes to see how a personal loan can help you consolidate your debts into one easy payment.
Documents for Personal Loan Application
Once you officially apply for a personal loan, you’ll submit documents.
They can be uploaded via a personal loan app, emailed online, faxed, mailed, or delivered in person. AmONE also allows you to apply over the phone.
You must document your income, identification, employment, and banking information.
In addition, if there are errors on your credit report or issues that require explanation, you’ll probably need to write a letter of explanation and supply supporting paperwork.
The following is a list of documents you’ll need to apply.
Application
The application form typically requests your identifying information, including your legal name, address, birth date, and age.
You’ll also divulge your desired loan amount and purpose, your income, employment, debts, and savings account balances.
If you apply for a secured loan, you’ll also identify the collateral and state its value.
Finally, you must sign (usually electronically) a statement indicating that the information is accurate, and you’ll authorize a credit report.
If you apply with a co-signer or co-borrower, the lender also requires that person’s information and documents.
Identification and proof of address
You’ll typically need to present at least one form of identification, such as:
- Driver’s license
- Passport
- State-issued ID
- Certificate of citizenship
- Birth certificate
- Military ID
You may be asked for separate proof of residence, with documents like:
- Utility bill
- Home insurance
- Lease or rental agreement
- Voter registration card
Note: You need a residential address, not a PO box.
Income and employment
You may be able to get away with supplying your last pay stub. If you’re traditionally employed, the lender could ask for the following:
- Paystubs
- Tax returns
- W-2s and 1099s
- Bank statements
- Employer’s contact information
Understand that even if you give the lender proof of income, the underwriter may still contact your employer.
If you’re self-employed, expect to provide one or two years of tax returns. Lenders may also accept 1099 forms or business bank statements.
Understand that lenders use your taxable income, not your gross income, to qualify you if you’re self-employed. (There are some adjustments, the most common being adding back depreciation deductions and subtracting extraordinary income like gambling winnings.)
Collateral information
If you’re applying for a secured loan, lenders want proof that you own the asset you’re pledging.
In most cases, it’s an automobile, real estate, collectibles, or investments.
You’ll need to provide proof that you own that asset. The lender will have it appraised or compare it to sales prices of similar assets.
Banking information
Most personal loan providers deposit the money directly into your checking account. So they need your routing and account number. Some lenders may request statements from your bank accounts.
Special requests from the lender
This category is mainly documents you’ll supply in response to requests by the lender.
For instance, if your credit report shows incorrect balances on your accounts or accounts that are not yours, you may need to explain the situation and provide proof.
If you want to use income from alimony or child support to qualify, you may need your divorce decree and proof that you’re receiving that income regularly.
Get Matched to the Best Personal Loan Rates
Seeing which lenders have the best personal loans to meet your needs is as easy as using our search tool. Compare personal loans and find the best rates being offered now.
Mistakes to Avoid
Personal loans are simple products with minimal requirements. However, some mistakes will make them more challenging or expensive.
Mistake #1: Applying instead of prequalifying with multiple lenders when shopping for a loan could cause your credit score to drop by enough points to affect your credit score. That’s because every hard inquiry lowers your credit score.
Mistake #2: Prequalifying with a lender that performs a hard pull also harms your credit score. Most lenders will tell you upfront that prequalification or preapproval won’t damage your credit score. If they don’t prominently say this on their site, make sure that they do not hurt your credit score during the early stages.
Mistake #3: Providing incorrect information can make your prequalification meaningless. If you misrepresent your income, you may not have the loan approval that you think you do. Mistakes in your banking information can create problems in receiving your money. And lying on your application is never okay and can get you into legal trouble.
You might consider checking your own credit before applying to avoid ugly surprises and correct errors that could cause the lender to charge you a higher rate or decline your application.
Keep your savings where it belongs. Get matched to a personal loan to pay for major purchases and unexpected expenses.
What To Do If You’re Turned Down for a Personal Loan
If a lender denies your personal loan application, your first move is to request the reason for denial. Federal law requires lenders to inform you of any reasons for rejecting your application or offering you less favorable terms on your loan than you wanted.
That explanation is called an adverse action notice or adverse action letter.
An adverse action notice is beneficial. Look at the reason for loan denial because that can tell you what your next course of action should be:
Take action
If your debt-to-income ratio is too high, run the numbers and see if you can lower it by paying off a debt or two before applying. Enlist a co-signer or co-borrower.
You can try putting up collateral and getting a secured personal loan. If you feel that you were denied in error, appeal your lender’s decision.
You’ll add paperwork showing the changes you’ve made or proving the underwriter’s error.
Take time
If your credit history has a few black marks, or you haven’t been at your job very long, a few more months of good repayment or job history may help you get approved.
Before reapplying, check your credit report and score and update your paperwork.
Take aim
Apply again, differently. If your credit rating was the reason for the denial, look at the best personal loans for consumers with profiles like yours.
If your debts are low, but your income falls beneath a lender’s income threshold, apply with another lender Minimum incomes are not often disclosed, and they vary widely — from about $20,000 per year to $50,000 per year.
Or ask to borrow less money or for a longer term to lower the payment.
This sounds like a lot of documentation on paper. But in real life, you’re likely to have all the needed information and verification close at hand.
Personal loan providers usually process applications smoothly and render fast decisions.
Final Steps: Ensuring a Smooth Personal Loan Application Process
Gathering the right documents is a crucial step in successfully applying for a personal loan.
While the process may seem daunting at first, having everything in order—from proof of identification and income to banking information—will help ensure a smooth and efficient loan application.
By staying organized and understanding the lender’s requirements, you can avoid unnecessary delays and increase your chances of approval.
Whether you’re seeking to consolidate debt or cover a major expense, being prepared with the necessary paperwork brings you one step closer to securing the funds you need.
