If you’re preparing to make a major purchase, do some home improvements, or consolidate debt, you might be wondering how much you can borrow with a personal loan.
Personal loans can come in small and large amounts, from a few hundred dollars to tens of thousands. Some lenders even offer personal loans for up to $100,000. And hard money lenders may go even higher. Of course, not everyone can qualify for a loan of that size. And you might not even need or want to borrow that much. But if you’re trying to figure out how big of a personal loan you can — or should — get, here are a few things to consider.
Related: Does loan purpose matter?
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How Much of a Personal Loan Can You Typically Get?
Personal loans typically range from $1,000 to $50,000. But the maximum amounts available can vary widely, depending on the lender and several other factors, including a borrower’s creditworthiness, whether the loan is unsecured or backed with some sort of collateral, and what the money will be used for.
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What Impacts the Amount You Can Borrow with a Personal Loan?
Even if a lender offers large personal loans, you may not qualify for the maximum amount. Some factors that could determine the amount you can borrow include:
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1. Credit Score
If you’ve been researching personal loans, you already may have noticed that your credit score can influence the interest rates various lenders offer. But did you know your score also can affect the amount you’re eligible to borrow? If you have a good credit score — or better yet, a very good or exceptional score — you can expect to qualify for a higher loan amount than someone with a lower score.
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2. Credit History
Lenders also will check your credit reports for signs that you could be a risky borrower — and that could include looking at bad stuff from the past. Most negative information must be removed from your credit report after seven years. However, some items, such as a bankruptcy, can stay there for up to 10 years. (If you aren’t sure about what’s on your credit report, you can request one free copy each year from each of the major credit bureaus.)
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3. Income and Debt-to-Income Ratio
Lenders want to be sure a borrower can afford to make the monthly payments on a loan, so you may find there are minimum income requirements for obtaining a larger loan amount. You also can expect lenders to calculate your debt-to-income ratio (the percentage of your gross monthly income that goes toward paying your debt) to assess whether you can manage another fixed monthly payment.
Generally, the lower your debt-to-income ratio (DTI) the better.
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4. Purpose of the Loan
Although it isn’t always a factor, some lenders may ask how you intend to use the money you’re borrowing. In some cases, the loan purpose could affect the loan amount and the interest rate you’re offered. And some lenders have restrictions on how a borrower can use a personal loan.
If you’re thinking about using a personal loan to make a down payment on a home purchase, you might want to check with your mortgage lender to be sure it’s allowed. Many lenders won’t let borrowers use a personal loan for a mortgage down payment.
You also may have to try another route if you’re looking for a same-day, quick personal loan for an emergency. Just be sure you’re borrowing from a reputable lender.
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5. Using a Cosigner
If your creditworthiness needs a boost to meet a lender’s large-loan requirements, it might help to add a cosigner with good credit and a higher income to your application.
You’ll want to make sure the person you choose knows what they’re signing up for, though. Your cosigner’s credit score could suffer if you make late payments or default on the loan. And they may have to take over your payments if you can’t or don’t follow through on the obligation. This could put a serious strain on any relationship.
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6. Collateral
Most personal loans are “unsecured,” which means you promise to pay the money back within a predetermined period of time, but you aren’t putting up some sort of collateral that the lender can take if you don’t. This puts more risk on the lender and could result in a higher interest rate or a lower loan amount.
If you choose to go with a secured loan—by offering your car or some other valuable property as collateral—a lender might be willing to give you a larger loan and/or lower interest rate.
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7. Longer Loan Term
A lender may be willing to give you a larger loan amount if you opt for a longer repayment term. With most personal loans, the borrower might have two to five years to pay back the money. But with a longer term — maybe 7, 10, or even 15 years—the payments could be lower and more manageable.
It’s important to note, however, that even though the monthly payments would be lower, the overall cost of the loan will be higher, because you’d be paying interest for a longer period of time.
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8. The Lender
Loan amounts and eligibility requirements can vary from lender to lender. And a single lender might have a range of loan amounts available depending on your credit profile and other factors. Using an online comparison site can make it easy and convenient to check multiple offers at one time.
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Questions to Ask Yourself Before Getting a Larger Loan
While you’re researching the question “How much of a personal loan can I get?” you also might want to ask yourself, “How much should I be borrowing?”
Just because a lender says you qualify to borrow $50,000 or more doesn’t mean you have to or should take the full amount. Before you agree to the lender’s offer, you may want to consider these questions.
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1. How Large of a Monthly Payment Can You Afford?
If you follow a monthly budget, you already may know just how much you can add to your debt burden — or if you can drop or reduce another expense in exchange for the new loan payment. But you also could use an online personal loan calculator to determine how much you can afford using different loan amounts, interest rates, and loan lengths.
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2. What Is the Purpose of Your Loan?
It’s possible the lender you choose won’t ask you your reasons to consider a personal loan — but you might want to ask yourself. If it’s something you’re doing to improve your finances, it may be a sensible move. Paying off high-interest credit cards with a lower interest personal loan, for example, could help you save money over the long run. Or if you have a pricey bill to pay — an expensive medical procedure, for instance — a personal loan might be your best option.
But if you’re thinking about using a large personal loan to pay for an expensive vacation or some trips to the mall for new clothes, you may want to consider how it might affect your other financial goals, now and in the future.
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Alternatives to Large Personal Loans
Although a personal loan can be a good option when you need money, it might not be the only way to go. A few other strategies to consider might include:
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1. 0% Interest Credit Card
If your goal is to pay off high-interest credit card debt, you may be able to use a 0% balance transfer credit card. This entails moving the debt from one or more cards to a new card for a set amount of time (or promotional period). There may be a balance transfer fee to pay, but you might not pay interest for a year or more. (It’s important, though, to be sure you can pay off the balance on the new card before interest kicks in.)
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2. Home Equity Loan or HELOC
Homeowners who’ve managed to build some equity in their home might want to consider a home equity loan or home equity line of credit (HELOC). The downside to this option is that you could put your home at risk if you can’t make your loan payments. But you may be able to get a lower interest rate than you would with an unsecured personal loan.
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3. Cash-Out Refinancing
A cash-out refinance is another way for homeowners who have enough equity in their home to access some much-needed cash. The process involves obtaining a new mortgage for a larger amount — and preferably a lower interest rate — than the existing mortgage. The borrower then receives the difference in cash. This method can involve paying closing costs, however, which can add to the overall cost of borrowing. And you’ll reduce the equity you’ve managed to build in your home.
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The Takeaway
Determining the amount you can and should request is a critical step in borrowing with a personal loan. But it’s also important to pay attention to how much the loan will cost.
Annual percentage rates (APR) for personal loans are determined by several factors, including your credit score, your debt-to-income ratio, and the amount you wish to borrow.
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This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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