We all have our reasons for needing a bit of extra cash now and then — a home remodel that’s long overdue, a once-in-a-lifetime vacation, or simply smoothing over a rough financial patch.
Whatever your reason, personal loans can be a helpful tool… that is, if you know what you’re getting into.
So if you’re flirting with the idea of borrowing, here’s everything you need to know to improve your chances and avoid a headache down the road.
Check Your Wallet Before You Borrow 💳
Credit card debt is usually the villain in every financial story. And, fair… most of the time, yes, it deserves the reputation. But sometimes? It’s the undercover hero.
If you can snag a 0% APR credit card, that borrowing suddenly becomes interest-free, which is something personal loans can’t compete with. Personal loan interest rates often range widely (think high single digits to 20%), while a 0% card for 12–18 months essentially lets you borrow for free.
What’s even better, you don’t necessarily need a brand-new account.
Many banks extend 0% APR offers on existing cards for new purchases or balance transfers. Sure, you’ll usually pay a one-time 3%–5% transfer fee, but that’s still far cheaper than months of interest on a personal loan.
So before you start filling out that loan paperwork, take five minutes to check your credit card offers. You might discover the cheaper workaround hiding in plain sight.
Is There a Minimum Income Requirement? 💲
There’s no universal rule that says you must earn a certain amount to qualify for a personal loan. Requirements vary wildly by lender.
Some are surprisingly flexible (approving borrowers with as little as $12,000 per year) while others want at least $25,000 or more.
Most lenders keep exact numbers vague, but long story short, higher income means better odds.
AKA more income = higher approved loan amount, stronger chances of a “yes,” and possibly even a better interest rate.
And those “pre-approved” loan invites from your bank? They do boost your chances — but they’re not guarantees. It’s still a gamble.
What Counts as Personal Income? 🧾
Lenders consider income from more places than you might think. Generally speaking, the following is all fair game:
Regular salary or hourly wages (bonuses, overtime, or commissions count too)
Self-employment income
Income from rental properties or investments
Social Security, disability, retirement, pension, or trust income
Alimony or child support
You’ll need paperwork, of course — pay stubs, tax returns, W-2s. Depending on the lender, you might need to show a few months’ worth… or up to a full year if the income is less traditional.
But Not All Income Is Treated Equally 🚩
With the IRS, income is income. But lenders? Eh… far more picky.
Most won’t count:
One-time bonuses or relocation packages
Income earned abroad or in a foreign currency
Business income you don’t report on personal tax returns
Your spouse’s money (unless you apply jointly)
So, sorry, but freelancers and gig workers absolutely may have a harder time in this department. That said, they absolutely can still get personal loans — just the bar is higher. Reasoning being that lenders want consistent income, not random payments rolling in at unpredictable times.
How to Boost Your Odds 💰
If you’re not sure whether you’d qualify right now, here’s how to improve your chances.
Polish your credit score. Even a small bump can dramatically lower your interest rate.
Lower your debt-to-income ratio. Pay down any high-utilisation credit cards.
Increase your income. A side hustle or second job can help — but keep at it for a few months so lenders see a stable pattern.
Shop around. A “no” from one lender doesn’t mean the other won’t say “yes.”
Request a smaller amount. Lower loan, lower risk for them.
Consider a secured personal loan. You’ll need collateral, but approval odds improve.
Use a co-signer (partner or spouse counts). Just remember that their credit is on the line too.
Borrow Smart, Without the Stress
Personal loans aren’t good or bad, they’re simply a tool. And like any tool, it’s all about how you use it.
So, before you borrow, explore cheaper options (hello, 0% credit card APR). Also, know what lenders look for, gather your documents, and be honest about what you can realistically afford.
And if a lender says no? That’s not necessarily a judgment — it’s a sign to tweak your finances, explore alternatives, or wait until the timing is right.