How long does it take to get a personal loan?

Posted 06.07.2023

Do you need quick funds for a special event, medical bills, rent, or maybe maintenance? You may wonder, “How long does it take to get a personal loan?” From application to funding, many factors influence your loan approval time.

To set your expectations and better prepare, here’s what you need to know about the personal loan application process.

How long does it take to get a loan?

When obtaining a personal loan, three key stages shape how long the process takes – the application, approval, and funding. These stages vary depending on the lender you choose to work with and the requirements involved.

Application

Of course, the first stage involves applying for a personal loan. Your application is usually the quickest part of the process. In most lenders, you may complete your application within a matter of minutes. If you come prepared with your documents, like your W-2s, pay stubs, bank statements, and more, your application can go smoothly.

Approval

After applying, it’s time to wait for your lender’s decision. Unlike the application stage, approval may take some time. Though some lenders provide instant approval, in most cases, it usually takes a few days to evaluate your application.

Funding

Once your loan is approved, funding typically takes between one to five business days. Sometimes, it may take longer than five days though some may provide same-day funding.

Bank

Credit union

Online lender

Approval time

1 to 7 business days

1 to 3 business days

Funding time

1 to 7 business days

1 to 5 business days

Banks

Many traditional banks offer personal loans with prequalification. If you get prequalified, this can help speed up your application process. But generally, banks may take one to seven days to approve and another one to seven days to fund your loan. This means banks may not be a good option if you need quick cash.

However, if you have an existing relationship with one, banks can be a reliable option. If the bank is familiar with your financial transactions and borrowing history, approval and funding may be quicker.

Though banks offer competitive personal loan rates, you usually need to have good credit to qualify for one. So, if you need immediate funding, but you have poor credit, banks may not be fitting. But if you can afford to wait and have a good credit standing, you may consider a personal loan from a bank.

Credit unions

Credit unions often provide financial products and services to specific communities. Since they are not-for-profit organizations, their loans commonly come with lower interest rates and fees. That said, you typically need to become a credit union member before qualifying for a loan. This can then add extra time to the process.

But if you’re already a member, application and approval may be easier and faster. Normally, it may take up to seven days to receive the direct deposit once you’re approved.

Online lenders

Online lenders are often the top choice for borrowers who want convenience and fast approval. Besides that, online lenders have more lenient credit standards than traditional banks. But they may usually come with higher rates and fees.

Though it can take up to five business days to claim the funds, online lenders tend to be the fastest when it comes to funding. Sometimes, online lenders may provide same-day approval and funding.

Payday loans, pawn shop loans, and title loans

If you’re in a tight spot, payday loans, pawn shop loans, and title loans may give instant relief. Oftentimes, you can get the funds on the same day you apply.

But it’s important to be wary of the extremely high interest these loans have. For example, the average payday loan rate may be anywhere between 300% to 400%. Meanwhile, title loans risk your collateral and usually have around 300% annual interest.

They offer quick finance but possible long-term consequences. You may have a hard time meeting your repayments. This then leads to more debts that potentially hurt your credit score.

Tips to get a personal loan faster

When you need quick funds through a personal loan, there are some things you can do to speed up your application process. Taking these steps can increase your chances of getting approved faster and receiving the funds you need:

1. Check your credit before applying

The first thing you should do is review your credit report from top to bottom and know your credit score before applying. Lenders evaluate your creditworthiness to have an idea of how you manage past and current credits. So, checking your credit helps you gauge your eligibility, identify areas for improvement, and narrow down your choices.

Say you have a low credit score or not enough income. You can either work on improving these factors before applying or search for lenders that you have a chance with.

2. Prepare the documents beforehand

Preparing the necessary documents ahead also helps avoid delays in your application. While the requirements vary, you generally need to show proof of identification, like your driver’s license, birth certificate, or passport. And depending on your employment, lenders may need your W-2s, pay stubs, tax returns, bank statements, etc.

These can vary based on your situation, so talk with your lender early on so that you can promptly prepare the documentation. Other than that, ensure you verify all information on your documents to avoid problems with your application.

3. Make sure your application is error-free

Even something as simple as checking your application is accurate and error-free prevents unnecessary setbacks. If lenders spot something not right on your application, they may send it back to you for corrections. This then prolongs the process.

That said, double-check all information before submitting your loan application. See to it that your address, social security number, and other personal details are correct.

4. Consider getting prequalified

Consider getting prequalified before formally applying for a personal loan. Prequalification gives a general estimate of what lenders may offer you. Since it only involves a soft credit check, this won’t impact your credit score.

Beyond having an idea of what you may qualify for, asking for prequalification also helps you narrow down your choices. Through this, you can focus on the lenders that are likely to approve your loan, so you save time in comparing your options.

5. Apply online

Applying online can make the process easier since many online lenders provide fast application and approval. So, considering the top online lenders can be helpful, particularly when you need urgent financing. At times, some banks and credit unions also have online applications. If your preferred lender allows this option, you may take advantage of it to shorten your wait time.

Final thoughts

Remember, quickly getting approved for a loan can be crucial, especially in times of urgent needs. Even if some personal loan lenders provide same-day funding, others may take several days to assess your application. With that, it’s beneficial to be familiar with the timeframes involved in each financial institution. This way, you can manage clear expectations and plan for your financial needs.

Frequently asked questions

How hard is it to get a $5,000 personal loan?

The loan approval process depends on your lender and circumstance. When you apply, lenders generally evaluate your credit history, credit scores, income, and overall financial standing. If you have good credit and show you can pay back the loan, it can be easy to get a $5,000 personal loan.
On the other hand, if you have bad credit, it may take some time to convince lenders to grant your application. Nonetheless, some lenders specialize in working with borrowers with poor credit.

How long does it take for a personal loan to pay out?

Lenders differ in how long they provide personal loan funds. In some lenders, you may receive the funds on the same day of your approval. However, others may take up to 7 business days or even longer to deliver the funds.

Do personal loans usually get approved?

Even if each lender has a different personal loan process, they generally assess your creditworthiness before approving your application. If you have good credit, enough income, and a low debt-to-income ratio, you have a high chance of getting approved.

What credit score is needed for a personal loan?

Typically, you need at least a credit score of 600 to qualify for a loan. But it’s still possible to get personal loans with bad credit as long as you apply to certain lenders. If your credit score falls in the good to excellent range (670 to 850), you have a higher chance of securing competitive rates.

Carla Soto

Carla is a skilled copywriter at BestFind with a background in marketing and communications. She specializes in reviewing personal loan and finance products to help readers navigate the complex world of personal finance.