How to Get a Personal Loan Preapproval in 6 Easy Steps

By Upstart Content Team | Updated August 3, 2022
reading time 8 min read
A woman uses her laptop to prequalify for an online personal loan

Key takeaways: 

  • Prequalifying for a personal loan allows you to compare rates and loan amounts from multiple lenders without affecting your credit score.
  • Personal loan preapproval doesn’t guarantee your application will be approved, but it can help you find the right loan.
  • Each lender may have different guidelines. However, you can typically prequalify for a personal loan in 6 easy steps.

Are you getting ready to take out a loan? Prequalifying for a loan can be a useful tool when you’re shopping around for offers. When you prequalify, you can compare loans, rates, and lenders without signing onto a loan or impacting your credit score.

Below, we’ll walk you through the loan preapproval process step-by-step and provide insight on some of the factors to consider when prequalifying for a loan.

What does prequalified mean?

When you prequalify for a loan, you submit your personal and financial details for a lender to review. Then, the lender runs a soft credit inquiry before providing you with an estimated loan amount and annual percentage rate (APR).

It’s important to remember that prequalifying for a loan doesn’t necessarily mean you’ll get approved for one. If you decide to move forward with a lender, they’ll run a hard credit check, which will appear on your credit report and may reduce your credit score. 

During the hard credit inquiry, your potential lender could see negative marks on your report that affect your terms or eligibility. These derogatory marks can include but aren’t limited to:

  • Late payments
  • Accounts in collections
  • Charge-offs
  • Debt settlements
  • Tax liens

Why is prequalifying for a personal loan important?

Prequalifying for a personal loan is important as it allows you to compare multiple loan offers without impacting your credit score.

When you prequalify for a loan, you’ll receive a rough estimate of how much it may cost you over the life of the loan based on factors like your credit score and desired loan amount. You can then compare offers from different lenders to find the best loan for your needs. 

Doing so helps ensure you get the best rates and repayment terms. It may also save you money over the life of your loan.

What’s the difference between prequalifying and preapproval?

Generally, “prequalify” and “preapproval” are used interchangeably. However, some financial institutions may differentiate between the terms.

For instance, you may have received automatic notices from a lender or credit card company saying you’ve been preapproved for a loan or credit card.

Getting preapproved doesn’t automatically mean your application will be approved. It simply means you have a better chance of getting approved for a new credit account based on past credit activity. Preapprovals may also come with estimated credit limits or terms.

Similarly, prequalifying for a loan allows you to estimate the total amount you could borrow and the potential rates you’ll face. However, you usually have to initiate the prequalification process yourself.

Can I get preapproved for a personal loan?

Yes, depending on your financial circumstances, you may be eligible for preapproval for a personal loan. Today, online lenders make the preapproval process easy for borrowers. 

Many online personal loan providers allow you to check eligibility and potential loan terms using a soft credit inquiry. For example, you can check your rates and prequalify online for a personal loan through Upstart in 5 minutes or less.

Benefits of getting prequalified for a loan

Trying to decide if prequalifying is worth it? As we’ve already mentioned, prequalifying comes with several benefits. Consider some of the advantages of prequalifying:

Compare rates

Prequalifying for a loan allows you to compare rates from different lenders. In doing so, you’ll get a better idea of your available options. You may also be able to save money on interest by choosing a loan with a lower rate or better repayment terms. 

Consider the two following example offers to get a better idea of how personal loan interest rates can impact your total costs.

Loan A – Lower Interest Rate Loan B – Higher Interest Rate
Loan amount $15,000 $15,000
Loan term 5 years (60 months) 5 years (60 months)
Interest rate 18% 22%
Monthly payment $381 $414
Total interest charges $7,854 $9,857
Total loan cost $22,854 $24,857

As you can see, even a 4% difference in your interest rate could cost you thousands more over the life of your loan. With that in mind, it pays to prequalify and choose a loan with the best rate and terms available.

Protect your credit score from multiple inquiries

In most cases, you can prequalify for as many loans as you want without any impact to your credit score. When you prequalify, lenders typically perform a soft inquiry before providing you with an initial approval decision and estimated loan amounts, terms, and rates.

The soft inquiry won’t ding your credit score. In most cases, it won’t even show up on your credit report, though there may be some exceptions. 

Regardless, a soft inquiry provides lenders with enough information to give you an idea of the loans you could qualify for without negatively impacting your credit score.

Budget for your loan in advance

Finally, prequalifying for a loan may make it easier to budget for your monthly payments. Your final loan amount and rates may change once you receive your offer. But prequalifying can at least help you determine if you have the financial bandwidth to take on another loan.

How to prequalify for a personal loan without hurting your credit

Finding the right loan isn’t always easy. Luckily, getting prequalified for personal loans is relatively straightforward.

Consider the 6 following steps to prequalify for a loan:

1. Check your credit score

Before you submit any information, take some time to check your credit score. Your credit score rates your financial behavior over the past 7 to 10 years. Traditionally, higher scores indicate greater creditworthiness, while lower scores can signal more risk.

If you have a score in the good-to-excellent range, you are more likely to qualify for loans with affordable interest rates. On the other hand, if your score falls below the “fair” range, it may be harder to qualify for an affordable loan. 

If that’s the case, you may decide to narrow your search to lenders specializing in loans for borrowers with poor credit. Or, you may consider applying for a loan through Upstart. Our model considers more than your credit score and uses your education¹ and work experience to help you find a personal loan.

2. Calculate your debt-to-income ratio

Next, consider your debt-to-income ratio (DTI). Your DTI measures how much of your salary is used to pay off debt, such as:

  • Credit card debt
  • Rent or mortgage payments
  • Loan installments

For instance, if your total, pre-tax monthly income is $3,500 and you spend $700 on various debts, you would have a DTI of 20%. 

Lenders typically look for a DTI of 36% or lower. If your DTI ratio is any higher, you may want to consider ways to reduce your debt load before applying for another loan.

3. Determine your loan type and amount

Next, determine what type of personal loan you need and how much you want to borrow. 

Generally, it’s easy to determine the type of loan you need. For instance, if you want to get out of an upside-down car loan, you may need an auto refinancing loan. If you want to consolidate credit card debt, you might consider a credit card consolidation loan.

Once you choose your loan, consider exactly how much money you need. It may be tempting to take out a larger loan and leave some money in the bank, but keeping your loan to a minimum can help you manage your debt-to-income ratio.

4. Research lenders

After getting a clear idea of the loan type and amount you need, take some time to research lenders. 

Every lending company won’t be a good fit for every borrower. It’s a good idea to narrow down your search to loan providers offering loans that best fit your needs. For instance, you may need to find a lender specializing in loans for poor or fair credit. 

On the other hand, you may have an excellent credit history. If that’s the case, you can narrow down your list to lenders offering optimal rates for borrowers with super-prime credit scores (think: above 720).

5. Submit your information

After narrowing down your options, it’s time to start the personal loan prequalification process. Each lender may require different personal and financial details, but make sure you have the following information handy: 

  • Name
  • Date of birth
  • Contact information
  • Identifying numbers, like your Social Security number
  • Annual income
  • Personal asset information
  • Employment status
  • Loan amount requested

6. Compare offers

Once you provide a potential lender with your information, you can typically access an estimated offer in minutes. Examine each offer carefully and compare loan features, like:


Your APR determines how much you’ll spend on your loan each year. It includes your interest rate and additional fees, such as origination or maintenance fees. 

As a rule, try to choose a loan with the lowest APR—with one exception. If a loan has a lower APR but a significantly longer repayment period (for example, 5 years versus 8 years), you may save by increasing your APR slightly and shortening the loan term. We’ll get into this in more detail below in the following section on repayment periods.

Repayment periods

Next, look at the repayment periods. Loans with longer repayment periods usually come with lower monthly payments, which could be helpful if you’re living on a tight budget. 

However, you’re likely to spend more on interest over the life of a longer-term loan. Consider the example below to see how loan terms affect your total cost of borrowing

Loan A – Shorter-Term Loan Loan B – Longer-Term Loan
Loan amount $15,000 $15,000
Loan term 3 years (60 months) 8 years (120 months)
Interest rate 20% 20%
Monthly payment $557 $314
Total interest charges $5,068 $15,172
Total loan cost $20,068 $30,172


As you can see, longer-term loans tend to come at a cost. Even if you reduce the interest rate on an 8-year loan to 18%, you’ll still spend more than $13,000 on interest—nearly doubling your total costs.

Pro tip: Use a personal loan calculator to get a better idea of your costs and how much you could spend over the life of the loan.

Loan amounts

You already know how much money you need to borrow. With that in mind, determine which loan offer is closest to the amount you need.

Loan fees

Finally, take a look at the fees involved with each offer. Charges vary from lender to lender but may include: 

  • Origination fees
  • Maintenance fees
  • Administrative fees
  • Prepayment penalties
  • Late payment fees

You don’t necessarily need to reject a loan because it comes with fees. For example, a lower interest rate or optimal repayment terms could make an origination fee worth it. Instead, get familiar with the fees you might face and make sure you include them when calculating the potential total cost of the loan.

What to do after you get prequalified for a loan

Congratulations—you’re prequalified! Getting prequalified for a personal loan doesn’t guarantee approval, though. With that in mind, it’s time to choose the best loan offer for your needs and submit a final loan application.

Like the prequalification process, each lender may have its own loan application guidelines. However, you’ll likely need to provide additional personal information and financial details to finalize the approval process.

What happens if you can’t get a loan preapproval?

If you didn’t get preapproved for a personal loan, don’t worry. Instead, consider the following options: 

  • Reach out to the lender. You may decide to reach out to the lender and ask why your application was denied. It may not change their decision, but you’ll have more information and may be able to improve your chance of prequalification with another provider.
  • Check your credit report. Head to to request a copy of your credit report. Then, check it for any outdated or erroneous information. If you notice any errors, you can petition the credit bureaus to have your credit report updated or the errors removed from your file, which could improve your chances of prequalifying for a personal loan.
  • Get a co-signer. Adding a co-signer to your prequalification application may increase your chances of getting approved. A co-signer is a financially stable friend or family member who agrees to take responsibility for your loan payments if you’re no longer able to make them. Doing so reduces the risk to your lender. Plus, their good financial habits may help you get a better loan.

If all else fails, take some time to work on your credit score and financial habits. Then, try reapplying after 4 to 6 months.

Ready to start the prequalification process?

Prequalifying for a personal loan can make the borrowing process more streamlined. Some may feel like it’s an extra step. But in reality, prequalifying could help you get a better rate, save on your monthly payments, or even find a loan with terms that work better for you and your needs.

Now it’s time to take the first step toward better borrowing. Just remember to do your research, compare your personal loan options, and always read the fine print.

¹Neither Upstart nor its bank partners have a minimum educational attainment requirement in order to be eligible for a loan.

This content is general in nature and is provided for informational purposes only. Upstart is not a financial advisor and does not offer financial planning services. This content may contain references to products and services offered through Upstart’s credit marketplace.

About the Author

Upstart Content Team

The Upstart Content Team shares industry insights, practical tips, and borrower success stories to help people better understand the important “money moments” of their lives.

More resources you may be interested in

What is an Adverse Action Letter?
7 Ways to Get Money Right Now
What is a Promissory Note and How Does it Work?

See if Upstart is right for you

Check your rate lock Won't affect your credit score¹

1. When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.