How to borrow money with a bank loan

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If you want to apply for a bank loan, the first thing you’ll need to do is check your credit.
Then, you’ll need to find out whether your bank offers personal loans. Generally, to get a bank loan you’ll need to be an existing customer with good credit.
If your bank does offer loans, you’ll need to assemble your paperwork, get clear on the terms of the loan, and make sure you have a plan to pay it back.
If your bank doesn’t offer loans — or even if it does — you may want to get quotes for comparison from online lenders, which have fewer regulations and can base their offers less on your existing credit and more on your ability to repay.
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Whether it’s a personal loan to purchase a car, consolidate debt, finance a business or make home improvements, applying for a personal loan from a bank can be a way to build your credit and pay for what you need.

To get a personal loan from a bank, you’ll generally need to be an existing customer with good credit, says Jamie Young, personal finance expert at Credible, an online loan marketplace.

"If you bank with Chase, Bank of America, or Capital One, you’ll have to look elsewhere — they don’t offer personal loans," says Young. "Goldman Sachs Bank offers an online application process through its Marcus brand, and it’s also easy to request rates from SunTrust Bank’s online lending division, LightStream."

Note that banks face more regulations than online lenders, so "as a result, they have the strictest lending standards," says Priyanka Prakash, lending and credit expert at Fundera. "Online lenders are a lot more flexible. They place less importance on credit and more importance on your ability to pay back a loan. That means income is paramount."

Interested in seeing what an online lender could offer? Consider these options from our partners:

Or, you can use a personal loan marketplace like Credible to request rates from multiple lenders at a time.

How to get a bank loan

1. Check your credit score

If you’re beginning the loan process for the first time, start by getting your credit score.

You can check it for free at any time at sites like Credit Karma, Credit Sesame, and Credit.com. You don’t need a perfect credit score of 850 to get a loan, but lenders see your credit score as an indication of your trustworthiness as a buyer and adjust their offers accordingly — so the higher your score, the better.

2. If something looks amiss, pull your credit report

Your credit score is three-digit shorthand for the information contained in your credit report, which monitors all of your credit-related activity. According to the Federal Trade Commission, you’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies: Experian, Equifax, and TransUnion.

Note that there are plenty of opportunities to pay for your credit report, but annualcreditreport.com is the best place to get your report for free (or call 1-877-322-8228). Be prepared to provide your name, address, Social Security number, and date of birth to verify your identity.

2. Know that loans can actually boost credit scores

If you are looking to take out a loan to consolidate credit card debt, or pay debt down faster, it can help in more ways than you may realize.

"Taking out a personal loan to pay down high-interest credit card debt can boost your credit score by lowering your credit utilization ratio," says Young. "That’s how close you are to hitting your limits on your credit cards. Try not to use more than 30% of your limit on any card."

In addition, If you haven’t taken out an installment loan like a car loan before, adding a personal loan to your credit mix can boost your credit score. "That’s because your credit mix makes up 10% of your credit score," she says.

3. Understand that there are types of personal loans

There are two types of personal loans: secured and unsecured.

Unsecured are loans which aren’t supported by collateral, like personal assets or a house. A bank evaluates whether to grant you the loan based on your financial history and credit score.

If you don’t qualify for an unsecured loan, lenders also offer secured options, which may be leveraged against assets or accounts you have at the bank, or something more tangible, like a house or car. Mortgages, home equity loans, and auto loans are considered secured loans, since you’re putting up collateral.

Remember that if you take out a secured loan using your home, your car, or something else as collateral, you run the risk of losing whatever you’ve leveraged should you become unable to pay your loans.

Most any lender that offers unsecured loans, including banks and credit unions, will also offer secured loans.

4. Make sure your bank offers personal loans

As Jamie Young from Credible said above, to get a personal loan from a bank, you’ll generally need to be an existing customer with good credit. Some banks don’t offer personal loans, so you’ll want to find out what your bank does offer.

If your bank doesn’t offer loans — or even if it does — you may want to get quotes from online lenders, which have fewer regulations and can base their offers less on your existing credit and more on your ability to repay. Online lenders can be an alternative to bank loans, or a basis for comparison.

After you’ve checked rates offered by online lenders, see if your bank will offer you a better deal.

5. Get your paperwork in order

One of the most challenging parts about getting a bank loan is the amount of documentation that’s required as part of the process.

"Getting a bank loan can take weeks, even months. The main reason it takes so long is that you have to submit a bunch of paperwork," says Prakash from Fundera.

The nature of the paperwork will vary based on the type of loan you’re applying for, but in general, you can expect to need:

pay stubs/proof of income
the last couple years of tax returns
documentation of 401(k)s and other financial accounts
photo ID
rent/mortgage history
proof of collateral, if you’re pursuing a secured loan

It’s a good idea to get these basics in order before applying for the loan, in order to speed up the process.

6. Try and get preapproved

Although it’s not a solid guarantee, preapproval is when a lender extends an unofficial offer on a loan, pending full approval.

In this instance, preapproval will tell the borrower what loan amount, terms, and repayment schedule they will likely qualify for in advance. Also, a preapproval acknowledges that the borrower has met the bank’s general eligibility requirements.

The process usually includes an application and a credit history evaluation, and while it’s a worthwhile step to take, it’s not a guarantee that the bank will extend those exact terms when it comes time to issue a loan.

7. Know the terms

Personal loans are installment loans, which is when you borrow a fixed amount of money and pay it back with interest in monthly installments over the life of the loan.

The terms of the loan are in months and can range from 12 to 96 months. When you complete the loan terms, that loan is considered closed. If more money is needed, you must reapply for a new loan.

8. Make a plan to pay it back

Once you get your loan, make sure you have a plan to pay it back. How much will you owe per month? Do you plan to pay the minimum required, or to make extra payments and pay it back more quickly? When is the payment due?

Consider setting up automatic payments from your checking account once your paycheck clears, or calendar reminders to make sure you never miss a due date.

"Your payment history makes up 35% of your credit score," says Young from Credible. "If you continue to make on-time payments and reduce your total amount of debt, your credit will improve" — and the next time you want to borrow money, it will be easier.

Considering an online lender instead of a bank? Take a look at these offers from our partners:

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