What Documents are Needed for Personal Loan?

When you apply to borrow money, lenders want to evaluate your finances to determine if you’ll be able to pay them back. While each may require different personal loan documents to make a decision, most require basic documentation such as proof of income, address and identity.

To save time, it helps to have documents for your loan application ready ahead of time.

Types of documents needed for a personal loan application

Here are the basic OneMain Financial document requirements, which could also serve as a guide for what other lenders might request.

Proof of identity

Most lenders typically ask for one or two forms of government-issued identification. Examples include:

• Driver’s license
• State ID
• Social Security card
• Passport
• Birth certificate
• Military ID

Proof of income

Almost every lender requires you to meet a minimum income requirement. Here are three personal loan documents most lenders accept to verify income:

• Pay stubs
• Bank statements
• Tax returns

It's important to note that not all lenders use your pay stubs and bank statements as proof of employment. Some lenders like OneMain allow you to provide your bank account credentials online to verify your income. If the lender requests, be prepared to provide your employer’s phone number and your manager’s name on your application to verify employment.

Proof of address

A proof of address is a document with your full name and address printed on it. Some lenders might use your ID to confirm where you live, but others might require one of the following as well:

• Utility bill
• Mortgage statement
• Lease agreement

The above example documents are typically required for unsecured personal loans. You may be asked for additional documents for a secured loan that requires collateral.

Keep in mind that these are just the basics. Since OneMain considers various aspects of each applicant’s financial history, we may ask for additional personal loan documents to get a more complete picture of your situation before making a decision.

How can I improve my chances of loan approval?

You could improve your chances of getting approved by doing the following:

• Know your credit score and check your credit reports: Ensure there are no errors on your credit report like a wrong address or debt that doesn't belong to you, and work on improving your credit score if needed before submitting your loan application.
  
  
• Lower your debt-to-income ratio (DTI): Your DTI compares your income to the debt you owe. Lowering your DTI can help you demonstrate that you have the necessary income to pay back your loan.
  
  
• Plan for repayment: It's important to know exactly how you plan to pay back the personal loan before you submit your application. You can use a personal loan calculator to get an idea of how different interest rates and loan amounts will affect your monthly payment to help you plan ahead.

What are my options if I don't get approved for a personal loan?

Every lender's decision is unique to the loan application and the applicant's financial situation. If you learn that your personal loan application was not approved, here are a few other possible options.

Apply with a cosigner

Applying for a loan with a cosigner may increase your chances of approval, especially if your own credit or income may not meet the lender's requirements. A cosigner is someone who agrees to take on the responsibility of the loan alongside you. Typically, a cosigner has better credit or a higher income than the primary borrower, which reassures the lender that the loan will be repaid even if the primary borrower encounters difficulties.

When you apply for a loan with a cosigner, both parties are equally responsible for repaying the loan. If you default on the loan—meaning you fail to make payments as agreed—the cosigner becomes legally obligated to repay the debt. Not only does this impact the cosigner's credit score and financial well-being, but it can also strain the relationship between you and the cosigner. Be sure to weigh all your options before going this route.

Consider a secured loan

A secured loan can be another option if you're having difficulty getting an unsecured personal loan, or if you want to be approved for a higher loan amount. Secured loans require collateral, which serves as security for the lender in case the borrower defaults on the loan. Collateral can include valuable possessions like a car or home. However, carefully consider the potential consequences of defaulting on a secured loan. If you fail to repay the loan as agreed, the lender has the right to seize the collateral to recoup their losses. This could result in the loss of your car or home depending on the type of collateral used.

Explore other financial options

If you're unable to take out a traditional loan, you may want to consider alternative ways to meet your financial needs:

• Borrowing from friends or family
• Negotiating payment plans with your creditors
• Exploring government assistance programs
• Selling items you no longer use, like furniture, appliances or clothing

Remember to avoid applying for multiple loans at once, as each application can temporarily lower your credit score. Instead, focus on improving your financial situation and finding the right solution for your needs.

Stay organized and optimistic

Applying for a personal loan can be a smooth experience if you get your loan documents ready ahead of time. And if you’re approved, being prepared can help you get money even faster.

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This article has been updated from previous postings on June 5 2019, January 21 2020 and February 16, 2021.
Matt Diehl contributed to this post. Video produced by Sam Kittinger.