Why some personal loans are approved faster—and how to speed yours up

One of the best things about personal loans is their versatility. Typically, a lender isn't concerned about how you spend the money as long as they approve of your intended purpose. So whether you're adding a deck to your home or consolidating debt, the loan process works the same. And you're smart to learn everything you can about personal loan approval before you fill out an application—including how long the process takes and how to get a personal loan faster. 

Times vary by lender and underwriting method

Underwriting is the process of evaluating a loan application. When it comes to how long it takes to get a personal loan, there are three terms to remember: Digital, automated, and manual. Here's a quick breakdown of each:

• Digital underwriting. Think of it as an umbrella term for all underwriting. Digital underwriting allows underwriters to spend less time on manual or clerical tasks when assessing the risk of granting a personal loan.

• Automated underwriting. This is the brains of the operation. Automated underwriting represents the technology-driven abilities within digital underwriting. Data collection, risk analysis, documentation, data enrichment, and other workflows are automated to replace manual tasks with algorithms and AI, improving speed and accuracy.

• Manual underwriting. Most financial products get the human touch at some point. In manual underwriting, a human underwriter or team analyzes your application data to determine creditworthiness and the level of risk associated with granting you a loan. Because it doesn't use technology to examine your application, manual underwriting takes more time than automated underwriting. If you have a unique financial situation, manual underwriting could improve your chances of loan approval. 

You can't judge a book by its cover

You can't look at a bank or credit union from the outside and guess whether it relies more heavily on automated or manual underwriting. By the same token, you can't automatically assume a digital or online bank works entirely with automated underwriting. 

It depends on what the lender needs to feel good about its decision. Let's say you're a small business owner with a somewhat complicated income stream. No matter which lender you use, there's a good chance your application is going to spend time in the hands of a manual underwriter. 

Other reasons manual underwriting may be required include applicants with no credit history or a challenging credit history. It may be necessary to manually underwrite the application of someone with a strong credit history but a higher-than-usual debt-to-income (DTI) ratio. 

What to do about a thin credit history 

If you're just starting out and you haven't had time to build a robust credit history, there are basic steps you can take to plump it up. For example: 

• Open a credit card account (regular, secured, or retail store) and pay it off in full each month.

• Pay all bills on time. 

• Keep credit balances low.

• Become an authorized user on the account of a family member or friend with good credit.

• Take out a small loan. A good place to start may be with a credit-builder loan. 

• Limit your number of credit applications. 

Make your information easy to verify

Most lenders verify the information you provide. Even if a lender chooses not to verify a piece of information (such as your income or whether you're renting or buying your home), it's a good idea to have the supporting evidence ready.

The easiest way to streamline the process is to gather the documents you're likely to be asked for. Before applying, take the time to gather these documents:

• Proof of identity. Typically, a government-issued photo ID (such as a driver's license or passport) will suffice.

• Proof of address. Include a mortgage statement, rental agreement, or utility bills in your gathered documents. 

• Proof of income. This may include recent pay stubs, tax returns, or W-2s.

• Employment verification. Some lenders may ask to contact your employer directly, so be prepared to provide your employer's contact information. 

• Banking information. You may need to provide a recent bank statement. In addition, if the loan proceeds will be directly deposited, you'll be asked to provide your routing and account numbers. 

• Self-employed documentation. If you own a business and are self-employed, you could be asked to provide tax returns and a profit and loss statement.

• Existing debt. The lender may request a list of all your current debts. 

Aside from streamlining the application process, gathering your documents in one place can make applying for a loan less stressful. If a loan officer asks for something,  you have it ready to go. 

Avoid small errors 

This may sound like common sense, but there's often a lot going on in your life when you apply for a loan. Double-check your application to ensure everything is correct—from your Social Security number to your employer's telephone number. 

How to speed up your loan approval 

The time it takes to get a loan approved can range from hours to days. Here are four factors that influence how long the process is likely to take:

1. Application. Providing accurate information on your loan application helps move the process along.

2. Lender. Some lenders simply take longer than others. If speed is an issue, ask each lender how long the process typically takes as you shop for a loan. Their answer will likely depend on their underwriting method (for example, automated underwriting is faster than manual). 

3. Verification. Again, how long it takes a lender to verify the information you provide depends, in large part, on the type of underwriting they employ. 

4. Funding. If you elect to receive funds electronically, it's generally faster than receiving a check by mail. 

Why is my personal loan taking so long to get approved? 

If it's taking longer to get your loan approved than the lender estimated, it could be for several reasons. For example:

• You could be missing paperwork. If you fail to include even one portion of the loan application, the entire process could come to a halt.

• It could be taking the underwriter longer than expected to verify your credit, employment history, or income. 

• The lender could have a backlog of applications, and yours is waiting in line. 

In summary, the easiest way to speed up the loan approval process is to have any required documents ready to go, ensure your application is 100% complete and correct, and work with a lender that uses automated underwriting. 

If you're concerned about how long the process is taking, contact your lender and ask if there's anything you can do or provide to speed up the loan. 

5 tips to apply for a personal loan with confidence

Some factors make it possible to apply for a personal loan with confidence. They include:

1. Pay all bills on time. Lenders feel better about lending you money when they know you have a history of paying bills on time. 

2. Order a free copy of your credit reports. Before applying for a loan, go to AnnualCreditReport.com to order free copies of your credit report from the Big Three credit reporting bureaus: Equifax, Experian, and TransUnion. Once you have your credit reports in hand, go over each one line by line looking for any errors. For example, you may spot a credit card listed that doesn't belong to you or a loan balance on a loan you've already paid off. If you find errors, circle them and report them to the credit bureau in question. The credit bureau has 30 days to either verify that the information is correct or to remove it from your credit report. Ensuring your credit report is accurate (and your credit score is as high as possible) helps maximize your chances of getting a personal loan. 

3. Prequalify. Most lenders allow potential customers to prequalify. To prequalify, you fill out an application (less detailed than a complete loan application) that provides the lender with basic information. Based on that information, the lender lets you know whether it believes you'll qualify for the loan, and if so, what your interest rate and terms will be. Prequalification usually has no impact on your credit score, so you don't have to worry about your score getting dinged. 

4. Invite a co-signer. If you have a low credit score, a lender may approve your application based on the credit history and income of a co-signer. For example, a parent or friend with a high credit score might agree to be a co-signer.