The amount you can borrow with a personal loan varies by lender and typically ranges from $250 to $100,000. Lenders consider factors like your credit score, income and outstanding debt to determine whether you qualify and how much you can borrow.
Before applying, review your budget to see how much you can afford. Missing payments could lead to late fees and a hit to your credit score.
How Much Money Can You Borrow With a Personal Loan?
Personal loan limits vary. The majority of lenders offer personal loans of up to $50,000, and some personal loan companies have lower limits of around $30,000.
The exact amount depends primarily on your credit and financial situation, though a few lenders offer no-income personal loans. Having a good credit score and a low debt amount compared with your income might help you qualify for a larger loan with a good annual percentage rate.
[Read: Best Personal Loans.]
Where to Get A Small Personal Loan
You could get a small personal loan from a range of financial institutions, including online lenders, banks and credit unions. Many lenders like Upstart and U.S. Bank offer loans starting at $1,000. A few lenders provide even lower loan amounts — for example, Navy Federal Credit Union’s minimum loan amount is just $250.
These small loans can be beneficial, especially if you need cash fast to cover a small expense. “It’s important only to borrow what is necessary and to have a repayment plan in place,” says Ryan Furlong, certified financial planner and wealth adviser at PurposePath Capital. “For the most part, these loans should only be used for emergencies.”
What’s the Largest Personal Loan Amount Available?
A few personal loan companies offer loans up to $100,000. One lender — BHG Money — has a maximum loan amount of $200,000.
Factors That Affect How Much You Can Borrow
When you apply for a personal loan, lenders usually consider the following factors:
— Credit score. The credit score you need to qualify for a personal loan depends on what lender you’re applying with. However, having an excellent credit score can help you qualify for a lender’s lowest advertised rate.
— Income. Lenders usually ask for proof of income in the form of recent pay stubs or W-2s to see whether you can afford the loan.
— Debt-to-income ratio. Your DTI measures how much of your gross monthly income goes toward debt each month. Lenders review this to assess whether they think you can handle additional debt.
— Collateral. Most personal loans are unsecured, meaning they don’t require you to pledge an asset to qualify, like a home or CD. However, some lenders offer secured personal loans. While this type of personal loan may come with a lower rate, the trade-off is that a lender can seize your collateral if you default.
How Much Can You Afford to Borrow?
Before you take out a personal loan, review your budget. Borrowing more than you could afford can make it hard to qualify for future loans, says Nick Marino, certified financial planner and founder of Breakaway Wealth Planning.
Furlong recommends keeping your total debt payments under 36% of your gross income. He also says to consider any fees the lender charges, like prepayment or origination fees, to evaluate the total borrowing costs.
One way to get an idea of your overall borrowing cost is to submit a prequalification application. If you prequalify, a lender will show you rates and terms you might receive after submitting a formal loan application. Afterward, use a loan calculator to estimate the cost of the loan.
The following table shows the cost of a $20,000 personal loan at 8% based on different repayment terms.
[Read: Best 0% APR Credit Cards.]
The Bottom Line
The personal loan amount you might qualify for depends on various factors, including the strength of your credit profile, your income, your monthly debt and the lender. Before you take out a personal loan, use a personal loan calculator to estimate how much you can afford to borrow. That way, you can minimize your chances of making late payments and damaging your credit score.
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How Much Can You Borrow With a Personal Loan? originally appeared on usnews.com
