How to Get a Personal Loan From a Bank

Personal loan funds can be used for any purpose.

Personal loan funds can be used for any purpose.

Personal loans can get you the money you need to go on vacation, get that new TV you wanted or pay down some high interest credit card bills. Just bring two forms of ID, your most recent pay stubs and find out your current credit score and you can apply for a personal loan with the bank of your choosing.

Finding the Best Rate

Like any other type of loan, personal loan interest rates and terms will be different depending on the bank you use. Compare what each bank is offering and find the best deal. Shopping around is a good idea, but applying for your loan in more than one place is not. Instead of applying to see whether you get approved or not, ask the specific requirements for the loan first. If you meet them, apply one time with the lender that offers you the best deal. If not, move on and find terms that suit you. If you apply with more than one bank, your credit scores will drop because lenders are checking it out. Try the bank where you already have accounts first to see if they offer you a better rate based on your history as a good customer.

Unsecured Loans

Unsecured personal loans will cost you more in interest than secured personal loans. The bank's taking a risk based on your credit score and income alone and is less willing to do it without some incentive. In most cases, a credit score of 640 or better is required if you're going to get an unsecured personal loan. If you default on your unsecured loan, there's no risk of losing property unless the lender sues and a court orders you to sell personal possessions to repay the debt. You're at risk of negative credit reporting and reduced scores, however.

Secured Loans

Secured personal loans have lower rates because the borrower has something to lose if the loan isn't paid. Collateral reduces the lender's risk and the interest rates you'll be charged. Suitable collateral includes real estate, vehicles, or office and manufacturing equipment in the case of a business applicant. Once a lien has been placed on the property in question, it's not considered yours any longer until the loan has been paid in full. If you default on the loan, the collateral property will be seized and sold to make up the debt you owe the bank. If you attempt to sell the collateral property, the lien will have to be satisfied before you earn any money from the sale.


If you're unable to get approved for an unsecured loan based on your credit and income and you do not wish to put up personal or business property as collateral, there is another option for you. Have a qualified co-signer take the loan with you so the borrower requirements are met and you have no risk of losing your property in case of default. If you pay on time, you both stand to gain with positive credit scores. If you default on the loan, the co-signer becomes responsible for carrying the load. While it may not be easy to find a willing co-signer for your personal loan, it's a good option for approval.


About the Author

Robert Morello has an extensive travel, marketing and business background. He graduated with a Bachelor of Arts from Columbia University in 2002 and has worked in travel as a guide, corporate senior marketing and product manager and travel consultant/expert. Morello is a professional writer and adjunct professor of travel and tourism.

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