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Key takeaways
- The time to get a personal loan can vary depending on factors such as whether the lender uses automated or manual underwriting, your credit score and the accuracy of your application information.
- Preparing your documents in advance, maintaining a solid credit score, and providing accurate information can help speed up the personal loan process.
- It's important to avoid certain types of fast loans, such as payday loans and car title loans, due to their high interest rates and potential for leading to a debt spiral.
Getting a personal loan can be a lifeline when you need to cover unexpected costs, consolidate debt or finance a big-ticket purchase. However, the time it takes to get approved and receive the funds can sometimes be a concern, especially if you’re in a pinch. Understanding what affects the disbursem*nt timeline and how you can expedite the process can save you valuable time and stress.
How long each step takes
There are three main steps when it comes to getting a personal loan: the application, getting approved and getting funded. Each of these steps takes a different amount of time depending on the lender you’re working with.
Application
While each lender has its own requirements for approval, nearly every application will request the same types of information. Because of this, you should be able to apply for a personal loan within just a few minutes. To speed things up, have personal and financial documents like your W-2s, identification, most recent federal tax return and bank statements on hand when you apply.
Approval
If a lender offers prequalification, it’s likely that you’ll know the status of your application within minutes. That’s because lenders that offer this feature typically use automated underwriting for approvals instead of relying solely on loan officers to make a decision.
With automated underwriting, a company’s software — or technology it pays to use — evaluates the information from your application and credit report. If its analysis determines you match the lender’s requirements you’ll usually get a conditional decision almost instantly. But an official offer will still hinge on the verification of the application information, which can take a day or two.
If a lender only uses manual underwriting the process can take a few extra days. This is because a person will be reviewing all of your information and comparing it against the underwriting standards.
Funding
If you are approved, funding generally takes between two to five business days. Smaller banks and credit unions may take longer, but most should be able to fund your loan within a week of applying if you opt for direct deposit into a bank account.
How long it takes to get a personal loan by lender type
Most loan applications only take a few minutes to complete, and funding can be delivered electronically to your bank account within one to three business days. But the exact timeline depends on the type of lender you work with and its underwriting process.
Online lender
- Approval time: Typically same business day.
- Funding time: Same day to three business days.
Most online lenders will fund your loan within three business days of approval. That said, the process may take longer if there’s any inaccurate information or if something is missing from your application.
Same- and next-day funding are commonly advertised — although both rely on when you apply and how your bank processes deposits. Even if you are approved and funds are sent that same day, you may not see the money in your account for two or three more business days.
Bank
- Approval time: One to three business days.
- Funding time: Three or more business days.
Some banks offer personal loans with quick prequalification and funding. You may also have access to better interest rates if you already have a checking or savings account with the institution. That said, if you fall behind on payments, the bank could automatically debit the funds from your checking account, depending on your loan agreement.
Many banks take longer to process applications and fund loans than online lenders. They also have more stringent credit requirements, which can make it harder for you to qualify if you have imperfect credit.
Credit union
- Approval time: One to three business days.
- Funding time: Three or more business days.
Federal credit unions are well known to have personal loans, but there are smaller local and regional credit unions that also offer them. Like with banks, funding is not as quick as online lenders. Despite that, a credit union can still be relatively quick if you already have an account and can receive a direct deposit. Otherwise, picking up a check and signing loan documents in person can add a few days to the process.
That said, credit unions tend to be more lenient with their credit requirements than most banks while still offering highly competitive interest rates. Unlike banks, which are owned by shareholders, credit unions are member owned. Because credit unions are committed to the financial success of their members rather than just making profits, they could offer better customer support than banks.
How can you speed up the personal loan process?
To speed up the personal loan approval process, you should prepare your verification documents in advance. Keeping everything organized can expedite the lender’s process of reviewing your loan application.
Opting for a lender that provides an online application process also often leads to quicker approval times. Regardless of the lender type, make sure the application is filled out completely and accurately. If you have questions about a certain field, contact customer service. An incomplete or incorrect application can lead to your loan being denied or at the very least slowed down.
Personal loan requirements
Personal loans are typically unsecured, meaning they do not require you to put up collateral — like a vehicle or house — in order to qualify. Because of this, lenders will look for potential borrowers who meet a few basic requirements.
- Good to excellent credit.
- Steady source of income.
- Low debt-to-income (DTI) ratio.
However, lenders may also consider your education, employment history and other factors when evaluating your application. There are even loans available for people with bad credit, although these will have higher rates and less generous repayment terms.
In general, personal loans are a fast way to receive funding. For lenders that offer prequalification, most can let you know if you qualify within minutes of submitting an application. And while it does vary by lender, you will likely be able to apply and receive your loan within a week.
What are some types of fast loans that should be avoided?
Short-term and payday lenders often attract borrowers with promises of immediate funds and no credit checks. However, unless you can manage to return the borrowed amount and pay high finance charges by the due date — usually your next payday — you might find yourself with steep fees. The typical payday loan carries an APR of 400 percent, which is why they are often considered as financially risky.
Car title loans, another form of quick cash borrowing, should also be avoided if possible. Despite potentially having slightly extended repayment periods compared to payday loans, they still impose steep interest rates and fees. Even worse, defaulting on a car title loan could lead to the lender repossessing your vehicle.
