How Much of a Personal Loan Can I Get?
The amount you can borrow with a personal loan depends on factors like your credit score, income, and debt-to-income ratio. Learn about typical loan limits, maximum amounts, and how to improve your chances of qualifying for a larger loan.
The amount you can borrow with a personal loan varies depending on the lender and your financial situation, including your credit score, income, and debt-to-income ratio. While personal loans are flexible for debt consolidation or home improvements, the terms and affordability are dependent on you meeting the lender’s criteria.
How Much Money You Can Borrow with a Personal Loan
The amount you can borrow with a personal loan varies, depending on the lender and your financial situation. Most lenders offer loans from $1,000 to $50,000, but some will lend more to borrowers with excellent credit and low debt-to-income ratios. Your credit score, income, and existing debt will determine how much you qualify for, and meeting or exceeding the lender’s criteria is key to getting a bigger loan. If you don’t qualify for the amount you need, improving your credit or reducing your debt can increase your chances in the future.
Maximum Personal Loan Amount
The maximum personal loan amount you can borrow is determined by the lender and your financial situation. Most lenders cap personal loans at $100,000, but a few like BHG Money will lend up to $200,000 in exceptional circumstances. These bigger amounts are rare and usually require excellent credit, high income, and a low debt-to-income ratio.
Typical Personal Loan Amount
The typical personal loan amount in the US varies depending on the borrower’s credit profile and the lender’s products. According to TransUnion, the average personal loan amount in 2024 is $11,687. Loans start from $1,000 and go up to $100,000 or more, but the amount approved is dependent on your financial situation.
For borrowers with good credit, most lenders will offer loans from $30,000 to $50,000. These amounts are flexible for debt consolidation, home improvements, or big purchases and accessible to those with good financial credentials. Borrowers with excellent credit and low debt-to-income ratio may qualify for bigger amounts, depending on the lender.
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Factors that Affect How Much You Can Borrow
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Credit score. Your credit score is key in determining how much you can borrow. A higher score means you’ve been a responsible borrower and are more likely to qualify for bigger loans with lower interest rates. Borrowers with lower scores may only qualify for smaller amounts and higher interest rates.
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Income. Lenders check your income to see if you have the financial capacity to repay the loan. A higher income means you can qualify for bigger loan amounts, as it shows lenders you can handle the monthly repayments comfortably.
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Debt to income ratio. Your debt to income (DTI) ratio is how much of your income is already committed to existing debts. A lower DTI ratio means lenders see you have enough income to take on more debt and increase your chances of qualifying for bigger loan amounts.
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Collateral. For secured personal loans, offering collateral such as a home or car can help you qualify for a bigger loan. Collateral reduces the lender’s risk so they are more likely to approve higher amounts, but it also puts your asset at risk if you fail to make payments.
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Co-signers. Having a co-signer with good credit and income can increase the loan amount you can borrow. A co-signer provides extra assurance to the lender that the loan will be repaid, so it’s a good option for borrowers who may not qualify for bigger loans on their own.
Calculating How Much You Can Borrow with a Personal Loan
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Review your budget. Start by checking your income and expenses to see how much you can allocate for monthly loan repayments. Subtract your total monthly expenses from your income to find out how much you have for repayment.
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Factor in your debt-to-income ratio. Divide your total monthly debt payments by your gross monthly income and multiply by 100 to calculate your DTI ratio. Lenders prefer this ratio to be below 36% including the new loan payment. This will help you estimate how much you can afford.
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Estimate your interest rate. Your credit score is the key to your interest rate. For example, borrowers with excellent credit (720-850) may get rates between 4.99% to 12.50% while those with bad credit (300-629) may get rates up to 28.50% to 36%. Use your credit score to estimate your rate.
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Calculate your monthly payment. Use the loan amount, interest rate, and loan term to calculate your monthly payment. For example, a $20,000 loan at 8% for 60 months would be $406.62. Loan calculators can help you compute this.
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Total loan cost. Multiply your monthly payment by the number of months in your loan term, then subtract the original loan amount to find out the total interest paid. For example, with the $20,000 loan above, your total payment for 60 months would be $24,397 so you would pay $4,397 in interest.
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Lender fees. Don’t forget to add any origination or prepayment fees to your total cost. These fees can add up big time, so make sure to factor them in your calculations.
How to Qualify for a Larger Loan Amount
Improve your credit score. A higher credit score tells lenders you’re a good borrower, so you’ll have higher chances of qualifying for bigger loans. Focus on paying bills on time, reducing credit card balances, and avoiding new debt to improve your score.
Reduce your debt-to-income ratio. Paying off existing debts will lower your DTI ratio and tell lenders you have more income to manage additional loan payments. This will make you eligible for a bigger loan.
Increase your income. Showing a stable and higher income will reassure lenders you can handle bigger monthly payments. Consider taking up a side job, negotiating a raise, or finding additional income sources to beef up your financial profile.
Offer collateral. Securing a loan with collateral such as a car or home reduces the lender’s risk and may make them more willing to approve a bigger loan. Be reminded that if you fail to repay, you might lose the asset.
Apply with a co-signer. Adding a co-signer with a good credit history and stable income will improve your chances of qualifying for a bigger loan. This will give lenders more confidence that the loan will be paid.
Apply with multiple lenders. Different lenders have different loan limits and requirements. Prequalify with several lenders to find those that offer bigger loan amounts and better terms for your situation.
Where to Get a Personal Loan
Banks. Banks are traditional lenders known for stability and a wide range of financial services, including personal loans. They offer in-person support and access to other financial products like mortgages and credit cards. However, they require higher credit scores, a longer approval process, and may charge higher fees.
Credit unions. Credit unions are non-profit organizations that offer personal loans with lower interest rates and more flexible terms. They are member-focused and offer personalized service, but you need to meet specific membership requirements and their approval process is slower since they have limited digital tools.
Online lenders. Online lenders offer fast and easy loan options with fully digital application, flexible eligibility, and quick funding. They are best for borrowers who need fast approval but lack in-person support, may have higher rates for lower credit scores, and be cautious of predatory lenders.
Personal Loan Alternatives
Home equity loans or HELOC. These options allow you to borrow against the equity in your home. A home equity loan gives you a lump sum with fixed interest rates and repayment terms, while a HELOC is like a credit line with variable interest rates. These loans have lower interest rates than personal loans, but you need to use your home as collateral and risk foreclosure if you can’t repay.
Credit cards. Credit cards can be a quick fix for smaller expenses, especially with 0% APR introductory offers on balance transfers or purchases. However, after the introductory period, credit cards have higher interest rates than personal loans, making them more expensive for carrying balances. Credit limits are often lower than personal loans, so they’re not ideal for big expenses.
Payday loans. Payday loans are short-term loans with super high interest rates and fees designed to give you quick cash until your next payday. These loans are available to people with bad credit since they don’t require credit checks, but they’re high-risk. The high fees and interest rates can trap you in a cycle of debt if you can’t repay.
Car title loans. These loans use your car as collateral, you can borrow based on your car’s value. While approval is fast, car title loans have high interest rates and fees, and you can lose your car if you default. This makes them a risky option for emergency cash.
Conclusion
FAQ
Can I use a personal loan for anything?
Most lenders allow personal loans for various purposes such as debt consolidation, home improvements, or medical expenses. However, some lenders may base your interest rate on your loan purpose or restrict how the funds can be used. For example, some lenders may not allow personal loans for higher education or business expenses. Always check with your lender to know the limitations before applying.
What is a good interest rate for a personal loan?
A good interest rate for a personal loan is lower than the market average, which ranges from 4.99% to 36%. For borrowers with excellent credit, a rate below 11% is competitive, while higher rates are less favorable. To get a good rate, focus on paying bills on time, reducing credit card balances, and limiting new credit applications. Comparing offers from at least three lenders will also help you find the best terms.
Can I have multiple personal loans at once?
There’s no limit to how many personal loans you can have at once, as long as they’re from different lenders. However, some lenders may limit the number of loans you can take out with them at the same time. Make sure you can manage payments for all your loans without overextending your finances. Always check with each lender about their policy.
