Know These Common Personal Loan Requirements Before Applying

Personal loans can help you cover big purchases. Plus, it’s an inexpensive alternative to credit cards. To get approved for a personal loan, you need to provide a couple of documents, which can vary by lender. 

These documents will help demonstrate your financial and personal information. Once submitted, lenders will examine and double-check them before deciding whether to approve your loan application or not.

Although each lender has its unique eligibility requirements and application process, most ask for similar documents. Here are the most common requirements you may need. 


To ensure that you can pay a loan, lenders generally stipulate income requirements on loan applicants. Lenders often approve applicants who earn a consistent, stable income because it reassures them that you can pay your monthly loan payments on time. 

Each lender has its unique minimum income requirements. If you’re employed by someone else, you’ll need the following documents:

  • Income tax returns
  • Bank statements
  • Employer’s contact information
  • W-2s 
  • 1099s
  • Paystubs 

Lenders may call your employer to confirm that your income and employment information are correct, but they won’t share anything about your loan application. As long as the information you present is accurate, there shouldn’t be any problems. 

On the other hand, if you are self-employed, the following documents will help prove your income:

  • Bank deposits
  • Tax returns
  • 1099s

Include documents of other sources of income to make your application more attractive to lenders.

Credit Score And History

One of the most important things a lender looks at is an applicant’s credit score. Your credit score manifests how creditworthy you are and what risks you bring to the lender. Generally, credit scores range from 300 to 850, with 850 deemed excellent credit and 300 considered poor credit.

The good news is that a perfect credit score is not necessary to take out a personal loan. But a low credit score may mean that you’re a risky borrower. Hence, lenders will likely reject your application.

The better your credit, the higher your chances of getting favorable terms. That’s why it is crucial to review your credit report and check your credit scores before applying to see where you’re standing. 

Even though the minimum credit score required for personal loan approval will vary depending on the lender, it’s a good idea to take steps to keep a good credit score. 

Debt-to-Income (DTI) Ratio

The DTI ratio is reported as a percentage and indicates the portion of an applicant’s gross income per month that goes directly to the monthly debt payments. Lenders get a clearer picture of your current income and outstanding debt with your DTI ratio.

On top of that, lenders use it to figure out how much you can afford to borrow. With all of these in mind, it’s wise to know your DTI ratio before applying for a loan. Here’s how you can calculate your DTI:

  • Get the sum of all your total monthly debt payments.
  • Divide the sum by your gross income per month.
  • Multiply the quotient by 100 to get your DTI ratio in percentage form. 

Proof of Address

This requirement can help lenders deduce the reliability of your lifestyle. To show proof of your current living situation, use the following:

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

The U.S. Postal Service provides resources to help you confirm or change your address. 


Secured personal loans will require you to put up collateral. The valuable asset you can pledge should be related to the purpose of the loan, for example, vehicles or real estate. But secured personal loans can be collateralized by other assets, such as collectibles, investment accounts, or cash accounts. 

So, if you default on your loan or fall behind on your payments, lenders can redeem the pledged valuable asset to recover the outstanding loan balance. 

Origination Fee

Some lenders require an origination fee charged to pay for the cost of processing the loan. Origination fees typically range between one percent to eight percent of the total loan amount, depending on the borrowers’ credit score. 

When it comes to a short-term loan vs long-term loan debate, origination fees are also important as they differ according to the loan term.

Some lenders ask for these fees as cash at closing, while others deduct them from the total loan amount given at closing or add them as part of the loan amount. 

The Bottom Line

You’ll undoubtedly have a smooth, less stressful experience applying for a personal loan by preparing these documents. But if a lender rejects your application, don’t give up. There are several steps you can take to boost your chances of getting a personal loan in the future. For example, you can use a co-signer or increase your income.