A personal loan is a flexible financing option you can use to cover a variety of expenses. Whether you need cash to cover a medical expense, home improvement project, auto repair or other unexpected bills, a personal loan might help you accomplish your goal.
Follow these five steps to get a $5,000 personal loan.
1. Consider Qualification Requirements
Before you apply for any type of loan, consider a lender’s qualification requirements. Every lender has unique rules when it comes to approving or denying loan applications. Some common personal loan requirements you might need to satisfy include:
- Credit requirements. Most lenders have a minimum credit score that you must meet to qualify for a $5,000 loan. If your credit history contains red flags (e.g., bankruptcies, recent late payments, etc.), some lenders might be hesitant to work with you. It’s wise to check your credit scores and credit reports to know where you stand. As a rule of thumb, we recommend a minimum credit score of 670.
- Income. In addition to your creditworthiness, lenders will want to see that you have a steady source of income. You might also need to earn a minimum salary to qualify for some personal loans, though not all lenders disclose this amount.
- Debt-to-income (DTI) ratio: Your DTI ratio tells a lender how much debt you owe in relation to your income. If your DTI ratio is too high, you might have a hard time affording a new loan.
2. Prequalify With Multiple Lenders
Before applying, prequalify with your desired lenders. Prequalifying lets you see what terms you may be eligible for without impacting your credit score. However, these terms are not guaranteed and may change after you submit your full application. Going through the prequalification process can give you a handful of loan offers to choose from.
3. Compare Your Loan Offers
With your list of prequalified offers in hand, it’s time to compare loan offers. Comparing multiple loan offers will help you choose the best loan. In addition to the interest rate, consider:
- Fees (origination fee, application fee, late fees, etc.)
- Prepayment penalty
- Repayment terms
- Monthly payment amount
- Loan uses
- Funding speed
- Additional benefits (unemployment protection, set your own due date, etc.)
4. Complete and Submit Your Application
Once you have your preferred lender and offer, submit a full loan application. Depending on the lender, you might need to provide information and documents such as:
- Social Security number
- Date of birth
- Employer and job title
- Proof of income
- Copy of driver’s license
- Copies of bank statements
5. Manage and Repay Your Loan
If the lender approves your loan application, the final step is to review your loan agreement. Pay close attention to key details such as the interest rate, fees, loan amount, repayment term and monthly payment for which the lender approved you.
If you’re comfortable with the terms of your $5,000 personal loan, you can sign and return the paperwork. With online lenders, this entire process typically takes place in a user-friendly electronic format.
Once the lender receives your signed paperwork, the funding process should begin. Depending on the lender, you might receive a direct deposit with your loan proceeds within a few hours to a few days.
From there, it’s up to you to manage the repayment process as promised. Some lenders may offer you a discount if you set up automatic payments. Autopay may also help you avoid late payments that have the potential to hurt your credit and cost you extra money in late fees.
How to Get a $5,000 Loan With Bad Credit
It can be challenging to qualify for a $5,000 loan when you have bad credit. However, you might find some lenders that specialize in bad-credit borrowers. Some of these lenders allow for credit scores as low as 560.
Before you take out a $5,000 personal loan with bad credit, understand that the lender may be concerned about the level of risk involved with the transaction. As a result, you may have to pay higher interest rates and fees to offset that risk before the lender will approve your loan application.
Where to Get a $5,000 Loan
Long-term Costs of a $5,000 Loan
Before you take out a loan, it’s smart to calculate the total cost of borrowing. The Forbes Advisor personal loan calculator can help you add up the cost of interest and fees over the life of a loan.
Let’s say, for example, you take out a $5,000 loan with a five-year term and a 12% annual percentage rate (APR). You will pay $1,673.33 in interest over the life of the loan. However, if you have a credit score of at least 720 and instead secure a low interest rate of 4%, you will only pay $524.96 in total interest for that same loan, saving you $1,148.37 in interest between those two options.
Improving your credit score is the best way to receive more favorable terms. If you don’t need the funds immediately, we recommend boosting your score before applying to reduce the overall cost of your loan.