Everything You Need To Know About Personal Loans With Soft Credit Checks

Getting a personal loan often requires a hard credit check which can temporarily lower your credit score. But some lenders offer personal loans with just a soft credit check. In this comprehensive guide we’ll explain everything you need to know about qualifying for and getting a personal loan with a soft credit inquiry.

What is a Soft Credit Check?

When you apply for any type of credit like a loan, mortgage or credit card, the lender will check your credit report and score to determine if you qualify. This is called a hard credit inquiry. Hard inquiries can lower your credit score by a few points and remain on your report for two years.

A soft credit check, on the other hand is when a lender or authorized third party views your credit report without impacting your score. Also called a soft credit pull or soft credit inquiry this type of check is used for things like

• Prequalifying for a credit card or loan
• Employment background checks
• Rental applications
• Checking your own credit

Soft checks allow lenders to view your creditworthiness without affecting your score. They can occur without your consent but won’t show detailed information like your account numbers. Soft inquiries also fall off your report within 12-24 months.

Can You Get a Personal Loan With Just a Soft Credit Check?

Most lenders require a hard credit check when you formally apply and get approved for a personal loan. But some lenders offer prequalification with only a soft pull.

Prequalification gives you an estimate of the loan amount interest rate and terms you may qualify for based on a soft inquiry. It’s not a guarantee you’ll get the loan, but can help you evaluate offers before applying.

If you proceed with the application after prequalifying, the lender will then perform a hard check. But prequalification lets you shop around without accumulating hard inquiries that impact your score.

Some direct lenders advertise approval with just a soft credit check. But these loans often have very high interest rates and fees to offset the risk of not checking your credit. They may also require collateral like your car title.

It’s best to avoid “no credit check” loans and improve your credit score for better rates in the future. Legitimate lenders will almost always perform a hard credit check during the application process.

How to Get a Personal Loan with a Soft Check

If you want to get prequalified to shop for the best loan, here are some tips:

• Check your credit reports – Make sure there are no errors negatively impacting your scores before applying. You can get free weekly reports from AnnualCreditReport.com.

• Pay down balances – Lower credit utilization can increase your scores. Paying down cards to less than 30% of the limit may help your loan eligibility.

• Don’t apply for new credit – New credit inquiries and accounts can lower your scores if you’ve applied for too much recently. Avoid new apps for at least 3-6 months before applying for a personal loan.

• Compare prequalification offers – Prequalifying with multiple lenders will allow you to compare options based on soft pulls only. Focus on the loan amount, rates, fees, and terms.

• Formally apply with your top pick – After comparing offers, submit a full application with your chosen lender. Be prepared for a hard inquiry at this point.

As long as you have a decent credit score, prequalification can help you shop for the best loan with no damage to your score. But make sure to also evaluate factors like customer service, reviews, fees, and qualifications.

Pros and Cons of Soft Check Personal Loans

Soft check personal loans have both advantages and disadvantages compared to standard loans requiring hard pulls. Here are some of the key pros and cons to consider.

Pros

• Shop and compare multiple lenders without accumulating hard inquiries
• See personalized prequalification offers before applying
• Avoid damage to credit score from hard checks

Cons

• Prequalification offers aren’t guaranteed approvals
• You’ll still need a hard check when formally applying
• Limited lender options offering soft pull prequalification

For borrowers concerned about minimizing hard inquiries, the ability to prequalify and compare lenders upfront can be beneficial. Just keep in mind that prequalification terms aren’t set in stone.

What Affects Personal Loan Eligibility and Rates?

While soft check personal loans allow you to shop around first, you’ll still need to qualify for approval. Most lenders evaluate the following factors to determine your eligibility and interest rate:

• Credit score – Borrowers with very good to excellent credit (690+ score) qualify for the best rates. Those with fair credit scores below 629 may not qualify.

• Income – Most lenders require a stable income source and minimum income level ranging from $2,000-$4,000 per month.

• Debt-to-income ratio – Your total monthly debt payments, including the new loan payment, usually cannot exceed 40-50% of your gross monthly income.

• Employment history – Lenders often look for at least 1-2 years at your current job or in the same field.

• Credit history – Applicants with short credit histories may not qualify for the lowest rates. Those with many recent inquiries or late payments may be denied or charged higher rates.

So while soft check loans help you avoid extra hard inquiries upfront, your actual qualifications remain very important for approval and pricing.

Top Lenders Offering Soft Check Personal Loans

Most major lenders allow you to prequalify and check rates with a soft credit check. Here are some top picks to consider:

• SoFi – Prequalifying is quick and easy with no impact to your credit. SoFi offers highly competitive fixed rates and flexible 3-7 year loan terms.

• LendingClub – One of the largest peer-to-peer lending marketplaces. Prequalify in minutes with a soft pull to view customized loan offers.

• Upgrade – Upgrade offers quick prequalification with a soft inquiry and same day funding. Apply in minutes for unsecured loans up to $50,000.

• Best Egg – See your loan options from three participating lenders with just one soft inquiry at Best Egg. Unsecured loan amounts range from $2,000-$35,000.

• Lightstream – Prequalify online with Lightstream to compare loan options for credit card consolidation, auto financing, home improvement, and more.

Be sure to evaluate lender reviews, fees, eligibility criteria, and other factors when choosing the best soft check loan option for your needs.

Alternatives if You Don’t Qualify for a Personal Loan

Even with a soft credit check, borrowers with fair or bad credit scores may struggle to qualify for a reasonable personal loan. When you don’t qualify, here are some alternative options to consider:

• Ask family or friends for a loan – A personal loan from family often requires no credit check. Just be sure to put a formal loan agreement in writing.

• Take out a secured loan – Secured loans require you to put up collateral like a car or asset, but may have lower credit requirements.

• Apply for a credit-builder loan – These loans help you build credit history as you repay the balance over time.

• Work on improving your credit – Pay all bills on time, lower balances, and correct errors to boost your credit scores over time.

• Explore loan alternatives like payday loans – While risky, payday loans and cash advances provide funds despite bad credit. Interest rates are usually very high.

• Wait and reapply later – Building your credit for several months can significantly improve your chances for approval in the future.

With some work, perseverance, and patience, there are ways to get funding even with bad credit. Weigh all your options carefully before committing to any loan product.

The Bottom Line

The ability to prequalify for a personal loan with just a soft credit check can be helpful for comparing loan offers without impacting your scores. While a hard inquiry will be required upon final application, soft check loans allow you to shop around first.

Focus on improving your credit and financial situation to qualify for the best possible rates. And evaluate all aspects of a lender like fees, reviews, terms, and approvals before committing. With some diligent preparation, personal loans with soft credit checks offer a smart way to secure financing while protecting your credit.