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How To Get a Loan

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Sometimes we can all use a little extra money.

Especially if you’re trying to make a larger purchase or need to pay for something such as a wedding or a cross-country move! Not everyone has the immediate funds to finance future life events or unexpected emergencies. If that’s the case, a personal loan could come in handy.

There are a lot of choices when it comes to selecting a personal loan, and as you start the process you’ll likely have some questions.

Should you use online lenders or banks, or should you borrow from your family?

Which lender has the best options?

Since it’s your money we’re talking about here, it’s important that we get it right. Let’s start from square one.

What are the different kinds of personal loans?

There are loans for many different purposes, but in the world of personal loans, there are two basic types: Secured and unsecured loans.

A secured personal loan is money borrowed from a lender, who uses your personal possessions - known as “collateral” in the loan world - as security for the loan.

Here are a few examples of collateral you could put up for a secured personal loan:

  • Automobiles
  • Owned property
  • Machinery and equipment
  • Valuables or collectibles

Unsecured personal loans, on the other hand, are a little different. Unlike their secured counterpart, unsecured personal loans are typically granted on the basis of factors such as creditworthiness and ability to pay, and (importantly) they don’t require you to put up any of your things as collateral to secure the loan. 

Unsecured personal loans could be a great option if you don’t want to risk losing personal possessions, such as your car or your home.


Lenders will typically charge interest to the borrower until the balance due on the loan is paid off.


What is a lender looking for in a borrower?

A lender may consider the criteria below when reviewing your application to determine whether you can pay back your loan:

  • Credit: A lender may check your credit history to see how you’ve handled your finances in the past
  • Collateral: If you’re applying for a secured loan, a lender may evaluate what you can actually pledge as collateral
  • Capacity: A lender may review your current income and living expenses to assess your ability to pay back the loan

In exchange for taking on the risk that a borrower will default on the loan, the lender will typically charge interest to the borrower until the balance due on the loan is paid off.

Good to know: Be sure to make your payments on time each month. Lenders will often charge interest on the additional days for which a personal loan goes unpaid. So mark your calendar or the back of your hand - whatever helps you remember.

5 steps to take when shopping for a personal loan

Step 1: Do the math ahead of time – at least to the extent that you can

The exact rates and repayment terms may differ lender-to-lender, but you can use a personal loan calculator and play around with the numbers to figure out what kind of monthly payment you can swing. 

When it comes to calculating how much cash you’ll need, be sure to include any additional costs that might creep in. For instance, some lenders charge an origination fee, so you’ll want to be sure to borrow enough to account for fees that may be deducted from your total loan amount. 

Step 2: Check your credit score

Your credit score is usually an important determining factor in getting approved for a personal loan or not (and what rate you might get), so knowing where you stand before applying can help give you an idea of your chances for approval. 

You can receive a free copy of your credit report from each of the three credit bureaus – Experian, Equifax, and TransUnion – every 12 months from

While most of the top personal loan lenders require at least fair credit, a good-to-excellent credit score could give you a better chance of getting approved and a potentially better (read: lower) rate.


Certain lenders may be flexible about how you use the loan.


Step 3: Choose your loan type

As we discussed earlier, there are a variety of different loan types you can choose from. First, decide whether you’ll go with a secured or unsecured loan. From there, consider the various types of personal loans and what best fits your needs.

Some examples of personal loan types include debt consolidation loans, home improvement loans, credit card consolidation loans, emergency loans, wedding loans, the list goes on!

Certain lenders may be flexible about how you use the loan, while others may only let you use the borrowed funds for specific purposes, so knowing what you intend to do with the personal loan can be helpful when choosing which option is best for you.

Learn more about our no-fee, fixed-rate personal loans

Step 4: Do some shopping around for the best loan rates

When it comes to personal loans, it can be a good idea to shop around and find the best rate – we’re talking annual percentage rate (APR).

While it can certainly be tempting to accept the first loan offer you receive (especially if your need for a loan is time-sensitive), try to resist and take some time to shop around and compare offers from different lenders. Generally, you’ll find personal loan offers from credit unions, banks, and online lenders.

Keep in mind, though, that some lenders will typically run a hard inquiry into your credit when you apply – hard inquiries could cause a temporary dip in your credit score. That’s not to discourage you from shopping around for offers, but can be important to keep in mind.

Step 5: Apply and provide documentation

Depending on which lender you decide to go with, you may be able to complete the whole application process online, or you may have to go in-person to the bank or credit union.

While each application may differ in specific details, you’ll typically need to give your name, address, contact information, employment status and income, and (unsurprisingly) the reason for your loan, and how much you’re looking to borrow.

After you officially submit your application, there may still be a few pieces of documentation you need to provide, such as a copy of your driver’s license and a copy of your most recent pay stub.

Your specific lender will let you know the exact documents you need to provide, but the sooner you get everything filed, the sooner you’ll know whether you’re approved for the loan or not.

Getting a personal loan doesn’t have to be confusing

Yes, there are many options and lenders to pick from. So it can be a good idea to spend your time looking for what personal loan best suits your needs.

Once you find the personal loan that’s best for you, you’re ready to make your purchase.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.