Loan Eligibility written on sticky notes isolated on Wooden Table

6 Eligibility Requirements To Qualify for Personal Loans

Written by: Rachael P.

Published on: February 7, 2023

Updated on: April 2, 2025

Personal loans are a great way to get the money you need for large expenses or unexpected bills. But not everyone is approved for a loan, so it's important to know what lenders look for when deciding if you're eligible.

In general, lenders look for borrowers with a good credit score, a consistent repayment history, and a low debt-to-income ratio. In the simplest of terms, they want to know that you have a history of paying your bills on time. Yet, even if your credit is less than stellar, you could still get approval with more stringent terms and conditions.

Key Takeaways

Lenders prioritize borrowers with a good credit score, consistent repayment history, and a low debt-to-income ratio. These factors indicate your ability to manage credit responsibly.
Even with less-than-stellar credit, you could still be approved for a personal loan, albeit with stricter terms. Taking steps to improve your credit and financial stability can increase your chances of approval.

6 Common Personal Loan Requirements

When you need financial assistance, a personal loan can be a valuable resource. However, securing a personal loan requires meeting specific criteria set by lenders.

Understanding these requirements and how to meet them can improve your chances of approval. Here are six personal loan requirements that we've identified most lenders will ask for.

1. Good Credit

One of the primary factors lenders consider is your credit score. A credit score is a three-digit number ranging from 300-900. The higher your score, the better your creditworthiness.

Generally, a score over 680 is considered good, and a score over 750 is excellent. On the other hand, a score below 600 is considered bad and could make it difficult to get approved for a loan. This isn't to say that you won't get approved, though. Keep in mind, though, that it may take longer, and if you're approved, you'll likely pay higher rates and have stricter terms.

How to meet this requirement: If your credit score is lower than desired, take steps to improve it. Paying bills on time, reducing credit card balances, and correcting any errors on your credit report can help boost your score.

2. Verifiable Income

Lenders need assurance that you have a stable income to repay the loan. They typically require proof of income, such as pay stubs or tax returns, to verify your financial stability.

How to meet this requirement: Ensure you have documentation of your income, including recent pay stubs, tax returns, or bank statements. If you're self-employed, you may need to provide additional documentation, such as profit and loss statements.

3. Low DTI Ratio

Your debt-to-income (DTI) ratio is another factor that lenders consider when evaluating your eligibility for a loan. This ratio is calculated by dividing your monthly income by your total monthly debt payments. If your DTI ratio is low, it means you have a good handle on your finances. If your DTI ratio is high, it means you have too much debt and may have trouble making payments.

Generally, lenders prefer a DTI ratio of 36% or lower. If your ratio is higher, you might still be approved for a loan but will likely face less favorable terms and conditions. If you need clarification on your DTI ratio, you can use a free online debt-to-income calculator to get an estimate.

How to meet this requirement: Paying down existing debts can lower your DTI ratio. Avoid taking on new debts before applying for a personal loan.

4. Proof of Identity

Lenders require proof of your identity to verify your application. This typically involves providing a government-issued ID, such as a driver's license or passport.

How to meet this requirement: Ensure your identification documents are up to date and match the information on your loan application.

5. Proof of Address

You'll need to provide proof of your current address, such as a utility bill or lease agreement. This helps lenders verify your residency and contact information.

How to meet this requirement: Ensure your proof of address is recent and includes your name and address as listed on your loan application.

6. Permitted Loan Use

Some lenders require you to specify the purpose of the loan, such as debt consolidation, home improvement, or medical expenses. Ensure you understand and comply with any restrictions on how the loan proceeds can be used.

Additional Factors That Can Affect Personal Loan Eligibility

When applying for a personal loan, it's important to consider several lesser-known yet impactful factors that lenders may evaluate in addition to your credit score and income. These elements can influence your eligibility, loan terms, and overall borrowing experience:

Collateral Requirements

Some personal loans are secured, meaning they require collateral—an asset you agree to pledge to the lender as security for the loan. This could include a car, savings account, or other valuable property. If you fail to repay the loan, the lender has the right to seize the collateral. While secured loans can offer lower interest rates, they also come with higher risk if you're unable to meet your repayment obligations.

Origination Fees

Lenders may charge an origination fee to cover the administrative costs of processing your loan. This fee is typically a percentage of the total loan amount and may be deducted from the disbursed funds. It's important to factor this into your overall borrowing costs, as it can impact how much money you actually receive and the total amount you'll repay over time.

Age and Residency Requirements

To qualify for a personal loan, you generally need to meet specific legal and residency criteria. Most lenders require borrowers to be at least 18 years old, though some states may have higher age minimums. Additionally, lenders often require proof of U.S. citizenship or permanent residency. Your immigration status can affect not only your loan eligibility but also the types of financial products available to you.

What Qualifies You for a Personal Loan

Meeting the requirements mentioned above generally qualifies you for a personal loan. Additionally, having a stable job, a good credit history, and a manageable debt load can increase your chances of approval, which we'll discuss in more detail below.

By preparing the documents listed below and meeting the qualifying criteria, you'll be well-equipped to apply for a personal loan and potentially secure the financial assistance you need.

Common Documents Needed for a Personal Loan

When applying for a personal loan, you'll need to gather several key documents to support your application. We've provided an overview with some examples, but this more or less mirrors the items above.

Identification. To verify your identity, you'll need a government-issued ID, such as a driver's license or passport. This helps ensure that you are who you say you are.
Proof of income. Lenders want to know that you have a stable income to repay the loan. You can provide this with recent pay stubs, tax returns, or bank statements. If you're self-employed, you may need to submit additional documentation, such as profit and loss statements.
Proof of address. Lenders need to verify your current address. You can do this with a utility bill, lease agreement, or other official documents that show your name and address.
Completed loan application. You'll need to fill out a loan application form, providing details about the loan amount, purpose, and your personal information. Be sure to complete the form accurately and sign it. If submitting online, you may need to upload documents, so make sure you have access to documents you may need to upload as image files.
Credit history. Lenders will review your credit history, including your credit report and score, to assess your creditworthiness. You can access your credit report for free once a year from each of the major credit reporting agencies.
Employment Verification. Providing contact information for your employer helps lenders verify your employment status and income. This may involve a simple verification call or email to your employer.

How Can I Check My Eligibility?

You can check your eligibility for a personal loan by reviewing the lender's requirements and comparing them to your financial situation. Many lenders offer prequalification, which allows you to see if you're likely to be approved without impacting your credit score.

Peoples credit scores in a crowd

3 Signs Your Personal Loan Will Be Approved

Securing approval for a personal loan can feel daunting, but certain signs can indicate a higher likelihood of approval. Here are key indicators to look for:

Strong credit score. A credit score above the lender's minimum requirement is a positive sign. Lenders view a higher credit score as an indication of your ability to manage credit responsibly. A score above 670 is generally considered good and may improve your chances of approval.
Stable employment. Lenders prefer borrowers with a stable job and sufficient income to repay the loan. A steady job history and a reliable source of income demonstrate your ability to meet the loan obligations.
Low Debt-to-Income Ratio. A manageable level of debt relative to your income is another positive sign. Lenders calculate your Debt-to-Income (DTI) ratio to assess your ability to manage additional debt. A lower DTI ratio, typically below 40%, indicates that you have enough income to cover your current debts and the new loan payments.

Consider the above a solid trifecta for getting a personal loan approved. If you can boast those three things, most lenders will consider you a responsible borrower and approve your loan request.

How To Improve Your Chances of Loan Approval

If you don't meet all of the qualifications for a loan, there are still steps you can take to improve your chances of approval:

Pay down your debt: If your debt-to-income ratio is too high, you can pay down your debt to lower your ratio and make yourself more attractive to lenders. This will also help to improve your credit, but it won't be an immediate shift.
Improve your credit score: Paying your bills on time and keeping balances low on your credit cards can help improve your credit score over time. Don't expect this to happen overnight, however. If you're hoping for a quick loan, you may have to settle for less favorable terms.
Offer collateral: Offering collateral, such as your car or home, can help increase your chances of approval. However, not all lenders will accept collateral.
Get a cosigner: If you don't qualify for a loan, having a cosigner can help increase your chances of approval. They will act as a backer for your loan and provide more validity to your application.

In conclusion, meeting the requirements for a personal loan involves demonstrating your ability to repay the loan and providing the necessary documentation to support your application. By understanding these requirements and taking steps to meet them, you can improve your chances of securing a personal loan that meets your financial needs.