Everything You Need To Know About Pre-Qualifying For A Personal Loan

Getting a personal loan can be a great way to pay for unexpected expenses or finance a major purchase. But before you actually apply for a loan, it’s wise to check if you pre-qualify first Pre-qualifying gives you an idea of your chances of approval and the loan terms you may be offered This allows you to shop around without impacting your credit score from multiple hard inquiries.

In this comprehensive guide, we’ll explain everything you need to know about pre-qualifying for a personal loan. Here’s what we’ll cover

• What is personal loan pre-qualification?
• Why pre-qualify for a personal loan?
• How pre-qualification works
• Pre-qualification vs. pre-approval
• How to check if you pre-qualify
• What information you’ll need to provide
• Reviewing your pre-qualified loan offers
• Next steps after pre-qualifying

Let’s dive in!

What Is Personal Loan Pre-Qualification?

Pre-qualification is the process of submitting basic information to a lender to see if you may qualify for a personal loan before completing a full application.

It’s an initial eligibility check that gives you an estimate of the loan amount, interest rate, and terms you may be offered. The pre-qualification process does not guarantee approval, but gives you an idea of your chances.

Pre-qualifying allows you to compare loan offers across multiple lenders without having to fully apply and take a hard inquiry on your credit report each time. This helps you shop around without impacting your credit score.

Why Pre-Qualify for a Personal Loan?

There are a few key reasons why pre-qualifying for a personal loan is recommended:

• Get an idea of your approval odds – Pre-qualifying shows if you may be approved based on basic eligibility criteria. This helps set expectations upfront.

• Compare loan offers – You can pre-qualify with multiple lenders to compare interest rates and terms side-by-side with no credit impact.

• Save time – Pre-qualifying is much faster than a full application. You avoid wasting time applying if you don’t pre-qualify.

• Avoid extra hard inquiries – Each full loan application results in a hard inquiry, which can impact your credit score. Pre-qualifying lets you shop and compare without extra hard hits on your report.

• See loan amounts you may qualify for – Pre-qualification gives you an estimated loan amount you may be eligible to borrow based on your income, credit, and existing debt obligations.

Overall, pre-qualifying gives you useful information upfront, saving you time and letting you see what offers are possible before you fully apply.

How Does the Pre-Qualification Process Work?

Pre-qualifying for a personal loan is straightforward and only takes a few minutes. Here are the basic steps:

1. Enter your basic information – This includes your name, income, desired loan amount, estimated credit score range, and contact details.

2. Lender reviews eligibility – The lender evaluates your provided information against their approval criteria to see if you may qualify. This is usually an automated process.

3. You receive pre-qualified offers – If you pre-qualify, the lender provides pre-qualified loan details like estimated APR, repayment terms, and loan amounts you may be approved for.

4. Accept an offer to apply – If you like one of the pre-qualified offers, you can proceed with a full application by submitting required documents and allowing a hard credit check.

5. Lender reviews full application – The lender does a comprehensive review of your full application and formally approves or denies you for the loan.

Pre-Qualification vs. Pre-Approval: What’s the Difference?

You may have also heard the term “pre-approval” when it comes to loans. Pre-approval is similar to pre-qualification, but involves a more in-depth look at your finances upfront.

Here are the key differences:

• Pre-qualification – Quick eligibility check based on limited information provided. Gives estimated terms you may qualify for.

• Pre-approval – More comprehensive financial review including income verification and credit check. Provides actual terms you are likely to be approved for if fully applying.

• Credit checks – Pre-qualification does not require a hard credit inquiry. Pre-approval usually involves a soft or hard credit check.

• Loan terms – Pre-qualification provides estimated terms. Pre-approval terms are largely final pending full application.

• Certainty – Pre-qualification estimates your chances. Pre-approval gives greater certainty about approval odds.

How To Check If You Pre-Qualify for a Personal Loan

Checking your personal loan pre-qualification is easy and only takes a few minutes online. Here are a few options:

• Lender websites – Most major lenders like LendingClub, Prosper, Best Egg, and Lightstream allow you to pre-qualify directly on their site. Look for options like “Check Your Rate” or “Pre-qualify.”

• Aggregator sites – Sites like Credible, Even Financial, and LendingTree let you pre-qualify with multiple lenders at once. This simplifies the rate shopping process.

• Lender mobile apps – Many lenders like SoFi, Marcus by Goldman Sachs, and other major banks have mobile apps that allow easy pre-qualification as well.

To pre-qualify, have the below information handy and enter it when prompted:

• Your desired loan amount
• Your estimated credit score range
• Your annual income
• Basic personal and contact information

It only takes a few minutes to enter the above details and submit for pre-qualification. You’ll typically get an instant decision with pre-qualified loan offers.

What Information Do You Need To Provide to Pre-Qualify?

When pre-qualifying for a personal loan, you’ll need to enter some key personal finance information. Having the below details ready will make the process fast and easy:

• Your name – Full legal name as it appears on your ID documents.

• Contact information – Email address and phone number so lenders can reach you.

• Social Security number – This allows lenders to confirm your identity.

• Date of birth – Verifies your legal age to take out a loan.

• Income – Your annual personal and/or household income.

• Employment details – Your job title, employer name, and years at your job.

• Loan amount – The loan amount you wish to borrow.

• Credit score range – Your estimated credit score (ex. 680-720).

• Legal residence – Physical address where you live.

Provide as accurate of information as possible, as incorrect details may lead to inaccurate pre-qualified offers. Double check that everything you enter is current and correct.

How To Review Personal Loan Pre-Qualified Offers

Once you pre-qualify with a lender, they will provide pre-qualified loan details for any offers you are conditionally approved for pending full application. Here are some tips for reviewing personal loan pre-qualified offers:

• Compare APRs – The annual percentage rate accounts for all loan costs. A lower APR is better.

• Evaluate terms – The loan repayment term impacts your monthly payment. Longer terms have lower payments but higher interest costs over time.

• Check fees – Origination fees and other charges can vary. Lower is preferable.

• Review loan amounts – Make sure the pre-qualified loan amount fits your borrowing needs.

• Assess lender reputation – Consider factors like customer service, funding speed, and borrower protections.

• Ask about discounts – Some lenders offer discounts for autopay, direct deposit, or co-signers.

Thoroughly evaluate each offer side-by-side. If you pre-qualify with multiple lenders, compare terms to find your best option.

What To Do After You Pre-Qualify for a Personal Loan

If you receive attractive pre-qualified personal loan offers that meet your needs, here are the recommended next steps:

• Proceed with full application – Pick your favorite pre-qualified offer and submit the full application documents.

• Provide required information – Be ready to submit income verification, bank statements, and other required paperwork.

• Accept hard credit check – Approving your official application involves a hard credit inquiry, which can temporarily lower your score.

• Review final terms – Double check the final approved loan details before accepting. Make sure nothing changed from pre-qualification.

• Sign loan agreement