How to Get a Loan from the Bank in 5 Steps - NerdWallet (2024)

Many national and local banks offer personal loans, with loan amounts from $1,000 to $100,000. Bank loans can have low interest rates as well as perks for existing customers — making them a smart first stop for borrowers.

Getting a loan from a bank can seem overwhelming if you’ve never done it before. Here are five steps to guide you through the process.

Before applying for a bank loan, see if you qualify. Some banks may only lend to current customers or those with a preapproved offer.

Most banks require applicants to have good to excellent credit (a 690 credit score or higher), though some banks may accept borrowers with fair credit (a 630 to 689 credit score).

Banks may evaluate your debt-to-income ratio and whether you have enough cash flow to take on new debt. Though most banks don’t disclose a maximum, 36% or lower is generally considered a good DTI.

One of the best ways to check your eligibility for a loan is to pre-qualify with the bank. Pre-qualifying takes a few minutes and won’t hurt your credit score. The process involves filling out a quick application to see what rate, loan amount and repayment term you may be eligible for.

Not all banks offer this option, though. If your bank doesn’t, call customer service and ask about eligibility criteria. Try to get as much detail as you can, including any minimum credit score and income requirements.

Even if you have a bank in mind, it’s still important to compare loans from different lenders to ensure you find the best option.

The annual percentage rate, which includes interest and any fees, is the best way to compare a loan’s cost. Finding the lowest APR can mean significant savings.

For example, if one bank offers a $20,000, four-year loan at 18% APR, you’ll make monthly payments of $587.50 and pay $8,200 in interest. But if another lender offers the same loan at 12% APR, you’ll make monthly payments of $527 and pay only $5,280 in interest.

Many banks list their APR ranges on their websites.

Also, consider pre-qualifying with a few online lenders. Almost all online lenders will let you pre-qualify, so you can have more loan options with no risk to your credit score.

As you compare rates, determine what repayment term and monthly payment best fit your budget. The longer your repayment term, the smaller your monthly payment, but the more you’ll pay in interest.

Use NerdWallet’s personal loan calculator to estimate your monthly payment by plugging in different loan amounts and terms.

Once you’ve checked eligibility, compared rates and selected the best option, it’s time to apply.

Some banks may require you to apply at a local branch if you’re a new customer, but most applications are online.

The application itself will vary by bank, but you’ll likely need to submit:

Once you submit the application, there will be a hard credit check, which temporarily lowers your credit score by a few points. Depending on the bank, you could get a decision within minutes, while others may take a few days.

If you’re approved for a loan, the bank will send you the loan agreement. Some banks may require you to sign it at a local branch, but most will let you sign electronically.

Make sure to read the loan agreement carefully to confirm that the loan amount, repayment term, APR and monthly payment amount are correct.

Also pay close attention to any fees, including late payment fees.

After signing the loan agreement, you should receive the funds in a lump sum within a week, though some banks promise same or next-day funding after you’re approved. You can have the funds directly deposited in your checking account or a check may be mailed to you.

Once you receive the money, make a plan to repay your loan. Most banks offer an automatic payment option, which could help you avoid late fees, and some banks provide a discount for opting into autopsy.