How Much of a Personal Loan Can I Get?

Factors influencing personal loan amounts

How much of a personal loan you can get is based on your creditworthiness.

First, a personal loan is money you borrow from a person or institution that you pay back over time. This type of loan typically doesn’t require collateral, so the lender is giving you the loan and the accompanying interest rate based solely on your creditworthiness.

Your creditworthiness is based on two primary factors: your credit report, which includes your credit score, and your income.

Here’s a closer look at each of these factors:

Credit score

Perhaps the most powerful number in your life today is your credit score. Those three digits at a glance tell lenders, potential employers, and landlords and property managers everything they need to know about your history of paying your bills on time.

The highest credit score you can get is 850, which reflects a perfect payment history, a solid mix of credit types and a low credit utilization ratio.

The lowest credit score you can have is 300, which means you likely have no credit history at all. Even a poor credit rating is usually in the 500s, which means you’ve had a troubled history of paying back your debts.

The lowest credit score that still qualifies for a loan is generally 580, but those loans will be smaller in size and have higher interest rates. In contrast, the higher your credit score, the more you’re likely to be able to borrow at a lower interest rate.

In short, the number is a single snapshot. For those creditors, landlords, and employers who want a closer look, they’ll pull your entire credit report. They generally need your written consent.

Credit report

The credit report is helpful for lenders and others who want a fuller picture. Here, you can see what exactly is driving a credit score down or up. For example, a borrower may have a lower credit score, but their report might show that they don’t have a long credit history. Meanwhile, all of their other payments have been made on time.

This may give a lender cause to extend a higher loan amount or a lower interest rate.

On the negative side, if a lender sees that you’ve recently applied for multiple loans, it could be more wary. This will show up as multiple credit inquiries on your credit report and make a lender worried that you’re desperate for funding.

Other elements lenders can see on your report include what types of other credit accounts you have open and how long you’ve had them. The longer you have a credit account in good standing, the better it reflects on your credit.

Basically, lenders are hoping to see that you have a history of opening credit accounts, using them and paying them off in a timely manner.

Income

The single biggest factor after your credit score when applying for a personal loan is your income. It will be hard to get a loan if you can’t prove that you’re making the money necessary to pay it off.

In general, financial experts advise you never go above a 35% debt-to-income ratio. This means your monthly debt payments on credit cards, loans and mortgages shouldn’t exceed 35% of your monthly income.

In order to provide proof of income, you’ll often have to submit a recent paystub or your previous year’s tax documents.

And it’s not just about how much money you make. Lenders are also looking at how long you’ve been with your employer and how your income has risen over the years. These positive factors show that you’re stable, reliable and more likely to pay off your loan.

If you don’t have an income, or your income is new or lower than you’d like, you also often have the option of adding a co-signer or co-borrower. This is someone who has a stable, higher income, and a strong credit score.

When you get a loan with a co-signer, you can often get a higher loan with a lower interest rate, and having the loan will help improve your credit score along the way.

» DIVE IN: How to apply for a personal loan

How to calculate your borrowing power

Borrowing power is how much the lending market is willing to lend you, based on the above factors.

There are tons of online tools you can use to calculate what amount you might qualify for, and at what interest rate. Use an online calculator to input your target monthly payments over a set period with an average personal loan interest rate. This will help you get a sense of how much you can afford to borrow and help you apply for a reasonable amount within your means.

Usually, lenders have a personal loan calculator for you to use before applying. That way, you’ll get a sense of what you qualify for and on what terms. This will also help you figure out where to get a personal loan, so you don’t apply with a lender that overcharges you with fees and higher-than-normal interest rates.

Using these calculators and getting prequalified is essential to helping you understand rates, fees, terms and more. With this knowledge, you can be informed so you don’t jump into an arrangement only to fail to meet the terms and end up with bad, or even worse, credit.

Strategies to qualify for a larger loan

If you’ve gone through this process and you’re hoping to qualify for more than you’re being offered now, you’ve got three main options:

• Increase your income: To increase your income, consider asking for a raise, making a move to an employer who pays more or picking up a side hustle. Use this extra income to also pay down any existing debt to improve your debt-to-income (DTI) ratio.
• Improve your credit score: You can work with an agency like the National Foundation for Credit Counseling, a nonprofit organization that helps people improve their credit and manage debt. Improving these areas of your finances can increase your odds of getting a larger personal loan.
• Co-signer: As a third option, you can ask someone you trust to co-sign on your loan to help you get the maximum personal loan amount you can qualify for. Their information on the application may help you get approved for more.

Types of personal loans and their limits

In general, personal loans can be secured or unsecured. Unsecured personal loans are common. With these types of loans, the lender doesn’t require collateral to back your loan.

Typically, unsecured personal loan amounts are $100 to $100,000, depending on your creditworthiness. You likely won’t see unsecured personal loans for more than $100,000 — the monthly payments on loans higher than that are substantial and too risky for the lender to be unsecured.

Secured loans require collateral to back up the loan amount. For instance, an auto loan is a type of secured loan because the vehicle is the collateral. If you default on a secured loan, the lender can repossess the collateral and sell it to recoup losses. The value of the collateral determines the secured loan limit. If you put up a car worth $10,000 as collateral for a loan, that’s usually how much you can borrow.

» COMPARE: Best personal loan companies

Where to find the best personal loan offers

Deciding where to get your personal loan can have a huge impact on how much you get, how much you pay, and how long you have the loan. You can get a personal loan pretty much anywhere that will give you one, but there are a few things to consider.

Larger companies like corporate banks will usually have stricter requirements and offer higher interest rates. Meanwhile, online lenders will often have competitive rates and terms because they have fewer overhead costs and can pass savings to customers.

Where the best personal loan offers are depends on your credit profile. If you have good credit and no marks on your credit history, then you generally have your pick among the many options available. But if your credit is poor and you have a history of missed or late payments, your options may be limited to smaller loan amounts and lenders who market personal loans for people with bad credit.

Just be aware of any personal loan scams and predatory lenders. Red flags include guaranteed approval offers, higher-than-normal loan amounts, upfront fees for approval and high-pressure tactics.