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Key learning points
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The time to obtain 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.
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Preparing your documents in advance, maintaining a solid credit score, and providing accurate information can help speed up the personal loan process.
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It’s important to avoid certain types of quick loans, such as payday loans and car loans, because of the high interest rates and potential to lead to a debt spiral.
Obtaining a personal loan can be a lifeline when you need to cover unexpected costs, consolidate debt, or finance a major purchase. However, the time it takes to get approved and receive the money can sometimes be an issue, especially if you’re in a pinch. Understanding what affects the payout timeline and how to speed up 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: applying, getting approved, and getting financing. Each of these steps takes a different amount of time depending on the lender you work with.
Application
Although each lender has its own approval requirements, almost every application will ask for the same types of information. This should allow you to apply for a personal loan within minutes. To speed things up, have personal and financial documents such as your W-2s, identification, the most recent federal tax return, and bank statements on hand when you apply.
Approval
If a lender offers prequalification, you’ll likely know the status of your application within minutes. That’s because lenders offering this feature typically use automated underwriting for approvals, rather than relying solely on loan officers to make a decision.
With automated underwriting, a company’s software (or whatever technology it pays to use) evaluates the information from your application and credit report. If the analysis shows that you meet the lender’s requirements, you will usually receive a conditional decision almost immediately. But an official offer will still depend on verification of application information, which could take a day or two.
If a lender uses only manual underwriting, the process may take a few additional days. This is because someone will review all your information and compare it to the underwriting standards.
Financing
If you are approved, financing typically takes 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 application if you choose direct deposit to a bank account.
How long it takes to take out a personal loan, per lender
Most loan applications take just a few minutes and funding can be deposited electronically into 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: Usually the same working day.
- Funding time: Same day up 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 is incorrect information or something is missing from your application.
Same-day and next-day financing are often advertised, although both depend on when you apply and how your bank processes deposits. Even if you are approved and the money is transferred that same day, you may not see the money in your account for another two or three business days.
Bank
- Approval time: One to three working days.
- Funding time: Three or more working days.
Some banks offer personal loans with quick prequalification and financing. You may also have access to better interest rates if you already have a checking or savings account with the institution. However, if you fall behind on payments, the bank may automatically debit the money 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 stricter credit requirements, which can make it harder for you to qualify if you have imperfect credit.
Credit union
- Approval time: One to three working days.
- Funding time: Three or more working days.
Federal credit unions are known to offer personal loans, but there are smaller local and regional credit unions that also offer them. Just like with banks, financing is not as fast as with online lenders. Despite this, a credit union can still be relatively quick if you already have an account and can receive direct deposit. Otherwise, collecting 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 lending requirements than most banks, while still offering very competitive interest rates. Unlike banks, which are owned by shareholders, credit unions are owned by their members. Because credit unions are committed to the financial success of their members rather than just making a profit, they could provide better customer support than banks.
How can you speed up the personal loan process?
To speed up the personal loan approval process, prepare your verification documents in advance. Keeping everything organized can speed up the lender’s review process of your loan application.
Choosing a lender that provides an online application process also often leads to faster approval times. Regardless of the type of lender, make sure the application is completed completely and accurately. If you have questions about a specific field, please contact customer service. An incomplete or incorrect application could result in your loan being denied or at least delayed.
Personal Loan Requirements
Personal loans are typically unsecured, meaning you don’t have to put up any collateral (such as a vehicle or home) to qualify. As a result, lenders will look for potential borrowers who meet a number of basic requirements.
- Good to excellent credit.
- Fixed source of income.
- Low debt-to-income ratio (DTI).
However, lenders may also consider your education, employment history and other factors when assessing 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 quick way to receive financing. For lenders that offer prequalification, most can let you know if you qualify within minutes of submitting an application. And while it varies from lender to lender, you can likely apply for and receive your loan within a week.
What types of quick loans should be avoided?
Short-term and payday lenders often attract borrowers with promises of immediate financing and no credit checks. However, unless you manage to repay the loan amount and pay the high finance charges by the due date (usually your next payday), you could face high fees. The typical payday loan has an APR of 400 percent, which is why they are often considered financially risky.
Car loans, another form of borrowing money quickly, should also be avoided if possible. Although they may have slightly longer repayment periods compared to payday loans, they still carry high interest rates and fees. Even worse, defaulting on a car loan can result in the lender repossessing your vehicle.
