When you’re eyeing a significant purchase, looking to pay off some bills, or considering consolidating your debt, a personal loan can be a financially sound option.

However, if you’re in immediate need of funds, you might wonder, “How long does it take to get a personal loan?” Let’s delve deeper into this topic to help you figure out if a personal loan is right for you.

Timeframe for Personal Loan Approval

The application process for personal loans is quite similar across credit unions, banks, and online lenders, yet the approval times can vary significantly.

Online Lenders

Focusing primarily on personal loans, numerous online lenders, including some internet banks, offer personal loans. With a plethora of online lenders available, some cater specifically to those with poor credit.

Interest rates can vary greatly, but online lenders often process loan applications the quickest. In fact, some online lenders can deliver a decision minutes after application submission.

Keep in mind, some online lenders may take one to two business days to make an approval decision.

Banks

One of the main reasons to apply for a personal loan through a bank is the existing relationship you might have with the financial institution where you have your accounts.

This could potentially streamline your application process, but banks still require time to process your application and make an approval decision.

Typically, you might wait up to seven days to hear if you qualify for the loan. However, some banks do offer pre-approval, which can provide you with rate checks and potentially speed up the approval time if you decide to proceed with the loan.

Credit Unions

Credit unions require membership for loan application consideration.

In some cases, credit unions might allow you to open a savings account and apply for a personal loan simultaneously, but others may require you to have an account for a minimum period before considering your loan application.

Once you meet the minimum time or account requirements, you’ll need to fill out an application, and the credit union team will need to assess your eligibility.

In some instances, you may need to discuss your loan application with a team member, but other times you can apply online. After submission, you can expect a response within seven days.

Personal Loan Funding Time: How Long Does It Take?

A key question to ask before applying is how long it will take to receive the funds.

The time it takes to get a personal loan depends on the financial institution you use.

Type of Lender

Time to Receive Funds After Approval

Online Lenders

0 – 7 Days

Banks

1 – 7 Days

Credit Unions

1 – 7 Days
Online lenders vary greatly, with some capable of disbursing loans within one business day post-approval, while others might take seven to ten days.

For instance, lenders like RocketLoans, Upstart, and Lightstream advertise that loan funding can be as quick as the same day of approval. Therefore, when searching for personal loans across different online lenders, it’s best to review typical funding times before deciding which deal suits you best.

Banks: If you have an existing relationship with a bank, traditional banks can be a good option for personal loans.

However, even if your local bank has all your personal information and holds your checking or savings account, this doesn’t mean you can access funds quickly. After loan approval, you might wait up to seven business days to receive the funds.

Credit Unions: Like banks, credit unions require an existing relationship for personal loan consideration, but this doesn’t mean quick fund access. Once your loan application is approved, you can receive the funds within seven business days.

Why Do Approval Times Vary Between Lenders?

We’ve discussed the three main financial institutions offering personal loans—online lenders, banks, and credit unions—but you might wonder about the differences between these types of lenders.

Online Loans Are Faster

While most are familiar with traditional banks, which have increasingly moved operations online, distinguishing between bank-issued personal loans online and through branches can be challenging.

Online loans often promise personal loan disbursement in just a few days, significantly faster than banks and credit unions.

However, not all online lenders operate like mature banks. Many are purely online services. These financial institutions still comply with financial regulations but typically only offer loan products, not checking or savings accounts.

Of course, due diligence is necessary as these online lenders may not have established reputations, so it’s crucial to verify their legitimacy.

Banks

Applying for a personal loan through a bank can be advantageous if you have an existing relationship with the financial institution holding your accounts.

This should make your application somewhat smoother, but banks still need time to process applications and make approval decisions.

In most cases, you might wait up to seven days for a response regarding your eligibility for a loan. However, some banks do offer pre-approval, which can give you a glimpse of potential rates and speed up approval time if you decide to proceed with the loan.

Banks and Credit Unions Have Similar Processes

Credit unions may seem very similar to banks, but a key difference lies in their ownership. Banks are shareholder-owned and accountable to their shareholders, whereas credit unions are owned by their members.

While banks aim to generate substantial profits to satisfy shareholders, credit unions are more focused on serving their member base. You might find lower borrowing rates, especially for personal loans, at a credit union.

What Are Underwriters Looking For?

So, what happens behind the scenes after you submit your personal loan application? Well, it’s passed to an underwriting team that reviews the application. Underwriters consider several factors to make an approval decision, including:

• Your Credit: This is one of the first things underwriters check to determine if you’re a high or low loan risk. Your credit affects both your chances of approval and the rates you’ll receive.
• Your Income: Most lenders have a minimum income requirement for loan approval. Underwriters check if you have a steady income to indicate you can consistently make loan repayments over the term.
• Your Current Financial Obligations: Underwriters also need to see if your income can cover the new loan payments while maintaining your current financial obligations. Hence, if you’re using the loan proceeds to pay off credit card accounts, it’s best to let the lender know.
• Loan Amount: Lastly, underwriters check if the loan amount you’re applying for aligns with the above criteria and preferred terms. While you might want to keep monthly repayments low, underwriters often frown upon small, long-term loan applications.

How Can You Get Money Faster?

While you might not control the time it takes for a lender to disburse personal loan funds, there are steps you can take to expedite the process. This can help you get approved quicker, thus accessing funds faster.

• Check Your Credit: Loan teams assess your credit report and score to make lending decisions. An on-time payment record and sufficient disposable income to cover all debts and more will likely favor your application.

  However, some lenders are more flexible and willing to approve personal loans for those with poor credit. Checking your credit before applying ensures you choose lenders more likely to make favorable decisions for you.

• Know Your Loan Amount: When applying for a personal loan, you’ll be asked for the amount you wish to borrow. Thus, you must know exactly how much you need and what you can afford to pay monthly.

  Don’t guess a ballpark figure; if consolidating debt, get up-to-date balances on all accounts. If planning a purchase, get some quotes or price comparisons.

• Review Your Application Details: Lenders need to verify all your information to make an approval decision, so errors on your documents can slow down the loan process.

  Take a moment before hitting “submit” to ensure there are no spelling mistakes or significant detail errors.

• Consider Pre-Approval: If you’re looking for a personal loan quickly, you don’t want to waste time dealing with lenders unlikely to approve your application. Moreover, multiple applications might raise red flags for any potential lender.

  Therefore, consider getting pre-approved by your preferred lender. This not only shows the likelihood of approval through a soft credit inquiry but also speeds up your application if you decide to proceed with the loan.

Bottom Line

The time it takes to get a personal loan varies by lender. If you’re in urgent need of funds, online lenders (preferably those not affiliated with banks)—which typically process loans faster than banks and credit unions—might be your best bet.

Thus, when comparing personal loans, consider the lender’s timeline to choose the right lender for you in the market.