How to get a $100,000 loan

Finding the right lender

Banks, credit unions and online lenders each have their own niche in the personal loan industry and can be suitable for different types of borrowers.

Joseph Camberato, the CEO of National Business Capital, explained the differences: “Banks are the slowest and most traditional. They’ll give you a great rate if you qualify, but their standards are tight, and their process takes forever. It’s a good option if you have spotless credit, and you’re not in a rush.

“Credit unions are a bit more relaxed than banks, especially if you’re already a member, but they still move slowly. Their rates are usually great, but access can be limited, and they’re not always built for speed or flexibility.

“Online lenders are on the opposite end of the spectrum. They move quickly, work with a wider range of borrowers, and they can structure deals in more creative ways. The trade-off is usually a higher interest rate, but for many people and businesses, speed and flexibility are worth paying a bit more for.”

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Meeting eligibility requirements

To qualify for a $100,000 personal loan, you’ll need excellent credit. Because approving an unsecured loan of this size is a big risk, lenders need to see strong financials. Expect to need a credit score of at least 670 to qualify. According to Credible, almost 80% of applicants with excellent credit were approved for a $100,000 personal loan.

To get the best terms, you'll want a credit score in the 700s. Camberato said: “You should aim for a 700+ credit score if you want a $100,000 loan. That’s not a hard rule (your income and cash flow matter too), but the higher the score, the better your odds and your terms.”

You'll also need a high income and low debt-to-income (DTI) ratio to qualify for such a large loan. Lenders typically want to see reliable income and a DTI ratio under 40% for personal loans.

To apply for a personal loan, you'll need the following information:

• Government-issued ID
• Social Security number (and card to verify)
• Date of birth
• Email address
• Phone number
• Physical address
• Utility bills (to verify address)
• Employment and income information
• Work phone number
• Employer name
• Recent pay stubs, W2s or tax returns
• Monthly mortgage or rent payment amount
• Loan purpose
• Desired term
• Loan amount

You may also need additional information specific to your circumstances. For example, if you’re applying for a loan to consolidate your debt, you may need to provide information about the debts you are paying off.

Comparing loan options

You'll want to pay attention to the interest rate, loan term, minimum payment and fees when comparing different loan options.

Interest rate

Generally, you should opt for the loan with the lowest interest rate. The higher the interest rate, the more expensive the loan will be. A higher interest rate will also increase the minimum payment. For example, you'll pay over $52,000 in interest on a $100,000 loan for 10 years at 9%. If the interest rate were 6% instead, you'd pay just over $33,200 in total interest.

Interest rates can also be either fixed or variable. A fixed rate will remain the same throughout the life of the loan, while a variable rate will change as the market interest rates change. A variable rate can either go up or down over time, and the minimum payment will be affected with each change.

Loan term

The loan term is how long it will take to pay off the loan when you make only the minimum payments. Loan terms for a $100,000 personal loan range from one to seven years. The loan term has a big impact on the minimum payment.

The longer the term, the lower the minimum payment will be, but you'll also pay more interest with a longer term.

For example, a $100,000 loan at 9% for five years has a minimum payment of $2,075. Stretch the term to seven years and you'll have a minimum payment of $1,609. However, you'll pay an additional $10,600 in interest on the loan with the seven-year term.

You'll want to choose the loan with the shortest term that you can afford. This will save you money on interest and get the loan paid off sooner. However, you want to ensure that you can comfortably afford the minimum payment.

Lock in a lower total cost

Choose the shortest loan term you can comfortably afford to reduce interest charges and pay off the loan faster.

Minimum payment

The minimum payment is the smallest amount you must pay each month to keep the loan current. The minimum payment will likely be a big factor when choosing which loan offer to accept.

You'll want to ensure that you can comfortably afford the payment. Skipping payments or paying late can seriously damage your credit score and affect your ability to borrow money in the future.

Unless the loan has a prepayment fee, you can make additional payments to pay off the loan more quickly if you choose. So if you are unsure of your future ability to pay the minimum payment, choose the loan with the lower payment to avoid the risk of default.

Don’t ignore fees

Compare interest rates, fees, and repayment terms together — not just the monthly payment — to see which loan is truly the cheapest.

Fees

Personal loans can come with a variety of fees. Keep an eye out for application, origination, late and prepayment fees.

Origination fees can be especially large with $100,000 personal loans, as they’re often a percentage of the loan. This can really add up with larger loans.

Also, keep an eye out for prepayment penalties. You don't want to end up paying an unexpected fee just because you paid off your loan quickly.

All other factors being equal, you'll want to choose the loan with the lowest fee.

Improving your chances of qualifying

A $100,000 personal loan is a large risk for the lender, so you'll need to have your financials in order before you apply. If you have less-than-perfect credit, you may have to work to improve your situation or add a co-signer to your loan.

Check your credit

To qualify for a $100,000 personal loan, you’ll need strong credit. In the time leading up to your application, be sure to pay all your bills on time. Additionally, review your credit report and dispute any errors to have them corrected or removed.

In addition, find out your credit score. This will give you an idea of whether you’re likely to qualify and how much work you'll need to do on your credit before you apply.

Pay off some debt

If your debt-to-income ratio is above 40%, you'll want to pay off some of your debt. Since the DTI ratio calculates how much of your income is being used to make minimum payments, you may want to focus on eliminating debts with high minimum payments.

For example, let's say your credit card has a $10,000 balance with a $250 minimum payment, but you owe $5,000 on your car loan with a $500 minimum payment. It makes more sense to pay off your car and eliminate the large minimum payment. This will have more impact on your DTI ratio than halving your credit card debt.

You'll also want to ensure your credit card debt is well within your credit limits to keep your credit utilization low.

Improve your chances of getting approved

• Pay off debts with high minimum payments first
• Get your credit report, and dispute any errors
• Add a co-borrower or co-signer

Prequalify

Many lenders allow you to prequalify for a loan. Doing this allows you to see if you’ll get approved and what the loan terms would be. It's a good idea to run these numbers and make sure you’ll be approved for the loan you’re seeking.

Prequalification doesn’t impact your credit since it’s a soft credit check. Therefore, you can apply with a variety of lenders and see which one is most willing to work with you.

Camberato said: “Apply with a few different types of lenders. Don’t just assume one route is the best. Apply with a bank, a credit union and an online lender so you can compare the offers side by side.”

Add a co-borrower

A co-borrower or co-signer can help you get approved for a loan you wouldn’t otherwise qualify for. Co-borrowers add their income and credit history to yours, and they agree to pay the loan themselves if you’re unable. This greatly reduces the risk to the lender.

A co-borrower has equal rights to the funds, but a co-signer only secures the loan and doesn’t have access to the loan money.

Understanding loan alternatives

There are several alternatives to a $100,000 personal loan. If you own your home, a home equity loan may be a good choice. Other alternatives include getting a loan from your retirement plan or peer-to-peer lending.

Home equity loans or home equity lines of credit

If you own your own home and have equity built up, you may want to consider a home equity loan or line of credit. These loans are similar to personal loans, but are secured by your home. That makes them easier to qualify for, and they often have lower interest rates.

» MORE: Reviewers’ picks for best home equity loans

The main drawback of a home equity loan is that if the loan goes into default, the lender has the right to foreclose on your home.

Retirement plan loans

If you have a significant sum saved up in your retirement plan, you may be able to take a loan from your savings. The benefits of this are that you don't typically need to qualify for a loan, and the interest rate is low. Also, any interest you pay will be deposited into your retirement account, so you’re technically paying yourself the interest.

The drawback is that those funds aren’t earning investment returns while you’re paying back the loan. Also, if you fail to pay back the loan for any reason, you could be subject to taxes and early withdrawal penalties. These drawbacks could have lifelong consequences.

Peer-to-peer lending

Peer-to-peer lending is when many individuals come together to fund a loan request, typically through an online marketplace. There are several platforms that accommodate these types of loans.

A benefit of these types of loans is that they typically have lower interest rates than you would find at a traditional lender. Additionally, they’re often easier to qualify for since each individual lender takes less risk than if one lender were to fund the entire loan.

One drawback is that the lending platform is often less lenient if payments are missed. These platforms lack the ability to work with borrowers experiencing financial difficulties and may report the loan to a collection agency after just 30 days.