Documents needed for a personal loan application

Whether you're looking to finance a purchase or do some debt consolidation, a personal loan could be a great option to look at. 

Most personal installment loans are unsecured, so you don't need an asset like a house you own to qualify. If you have a good credit score, you could also get a much lower rate than credit cards. And you can use your loan proceeds for just about anything you want.

You can't get started using your loan until you've been approved, however. Here, we'll walk through some personal loan requirements and give you a personal loan checklist that makes your application stress-free.

What documents are required for a personal loan?

If you're looking to get a personal loan, it's helpful to know up front what documents you’ll need. Here's a rundown of what to put together:

• Proof of ID

• Proof of address

• Proof of income

• Bank account information

• Information on your existing expenses and debt

Most lenders will ask for this information as a part of the personal loan application. The application will also include a document that gives the lender permission to run your credit. 

You can typically apply for personal loans online, though some lenders may require you to apply in person.

Why lenders ask for these documents

Lenders ask for these personal loan documents to verify that you are who you say you are, and that you have the ability to repay the loan you're asking to take out.

Identity theft has become increasingly common. Someone could steal your identity, open a personal loan in your name, fail to repay it, and destroy your credit in the process. By verifying your identity, personal loan lenders are protecting you as well as themselves.

Also, personal loans are unsecured, which means they're not tied to another asset you own. This makes them riskier for the lender since their options are limited if you can't repay the loan. 

For example, if you don't pay your mortgage, your lender could force the sale of your home through foreclosure to get repaid. If you don't pay an auto loan, your lender could have your car repossessed.

Personal loan lenders don't have the same options for getting their money back if you stop making payments on your loan. So, lenders try to lessen their risk by asking for verification that you can handle the loan, including proof of income and information about your debts. It's also why lenders check your credit history as part of the loan approval process.

Checklist: What to prepare before you apply

Gathering your documents for loan approval could make the process of applying for a personal loan go more smoothly. Here's an easy personal loan checklist to follow. 

Proof of ID

• Driver's license

• Passport

• Birth certificate

Proof of address

• Utility bills

• Bank statements

• Credit card statements

• Mortgage statements

• Rental agreement

Proof of income

• W-2 forms

• Bank statements

• Pay stubs

• Recent tax returns

• 1099 forms if self-employed

Bank account information

• Name of financial institution

• Bank account number

• Bank routing number

Additional financial information (may be needed if consolidating debt)

• Loan documents for existing loans

• Credit card statements

Common mistakes to avoid when applying for a personal loan

The nice thing about getting a personal loan is that if you're approved, you could have your money very quickly. Here’s how to skirt some common personal loan application errors to avoid holding up your loan:

• Missing documents. Make sure to run through the personal loan checklist above so you don't get tripped up by missing paperwork.

• Incomplete information. Failing to fill in all of the required fields on your application could cause a delay.

• Incorrect information. Botching your Social Security number could cause your application to get rejected, while entering the wrong bank account details could delay your receipt of funds once your application is approved. Check your information carefully when filling your application out. 

What happens after you submit your personal loan documents?

Once you submit your personal loan documents, your lender will begin the verification process. They'll verify your identity and review your financial information, such as proof of income, to figure out if you qualify for a personal loan.

Your lender will also check your credit report to get a sense of your risk profile as a borrower. Your lender may also choose to contact your employer to verify your employment status. Lenders take these steps to protect themselves and reduce the likelihood of loaning money to someone who won't repay their loan.

Depending on your situation, your lender may approve your personal loan application the same day you submit it, or within a few days. Once you sign your loan documents and accept the loan and its terms, funds are usually made available to you quickly. The exact speed depends on your lender, but you may have your money the very next day or within a few days.

What’s next: Apply for a personal loan confidently

Now that you know what documents are needed for a personal loan application, you can apply with more confidence. You may also want to check your credit score before you apply.

Compare different lenders to get an idea of rates. In fact, some lenders will allow you to get prequalified for a personal loan without a hard inquiry on your credit report.

Either way, knowing what documents are required for a personal loan could help you complete your application faster once you decide which lender to apply with.

If you're interested in getting a personal loan, start here to check your rate without any credit score impact.