A lender’s advertised maximum personal loan amount isn’t necessarily the amount you’ll get approved for, and it certainly isn’t the amount that may be best for your own finances. Instead of getting dazzled by a large loan offer, take into account lender maximums as well as your financial scenario before signing on the dotted line.
Find out what factors impact your loan amount from the lender’s perspective and what information you should look at to determine your own comfort level for borrowing.
- Lenders typically offer personal loans between $1,000 – $100,000.
- Eligibility factors include credit score, income and debt-to-income ratio.
- Use an affordability framework to determine the right loan amount for your budget.
- Avoid common mistakes such as overborrowing and ignoring lender fees.
How Much Can You Get With A Personal Loan?
You can typically get a personal loan for $1,000 – $100,000, but the specific amount you qualify for depends on your finances and credit history, as well as what lenders offer. Here’s a breakdown of lender maximums, borrower eligibility criteria and what makes financial sense for you.
What Lenders Offer
The maximum personal loan amount is typically $100,000, but the most common range is between $1,000 – $50,000. Smaller financial institutions, like credit unions, may offer smaller loan amounts under $1,000. This could be a good option if you need a small amount but want to avoid high-interest alternatives like payday lenders.
For larger loan amounts, look for lenders that advertise higher limits or allow a co-signer who can help you qualify with a higher income level. If you’re open to using collateral to back the loan, search for lenders offering secured loans.
What You Qualify For
Personal loan limits are also based on your individual financial situation. Lenders look at the following eligibility factors:
- Credit score: Lenders run a credit check to see your past history of repaying debt. A strong credit history improves your chances of approval as well as your potential loan amount, whereas negative entries on your report may reduce your loan offer.
- Income: Your monthly income is a huge deciding factor in your loan amount because it indicates whether you can afford the monthly payments.
- Debt-to-income ratio: Lenders also compare your income to your debt, using a debt-to-income ratio (DTI). Your existing debt payments and your new monthly loan payment should only take up 36% or less of your gross income. Lenders limit your maximum personal loan amount based on your DTI.
- Employment: You also need to provide proof of income, usually through employment documents like pay stubs or W-2s. The lender may also call your employer to confirm your job status and income amount.
- Collateral: You can use collateral to take out a secured personal loan, which can help you qualify for a larger loan amount and a lower interest rate. Of course, you risk losing the assets if you default.
What You Can Actually Afford
As you apply for a personal loan, don’t automatically accept the maximum amount you’re offered. You need to make sure the monthly payment and the total repayment cost (including the loan amount and interest) are both within your financial comfort zone.
Start by looking at your monthly budget to determine how much you’re able (and willing) to devote to a new loan payment. You don’t want to overburden yourself so that you can’t afford your regular bills, savings and financial emergencies. Otherwise, you’re at risk of putting your budget under strain and potentially having to take on additional debt to afford everyday expenses.
Next, look at the total cost to repay your loan by calculating the total interest and any fees, such as origination fees. Is it worth adding that extra dollar amount to whatever you plan to use the loan funds for? Compare the final repayment amount to how you plan to spend the loan money, and make sure you’re comfortable with it.
Finally, consider the length of the loan term and your financial stability. How would your bank account feel if you suddenly lost your job? Do you have enough of a buffer to keep up with the loan payments and your other bills for a few months if you had to search for a new job? If a larger loan amount puts you in a precarious financial situation, you may want to consider a smaller balance.
Personal loans from top lenders. All in one place.
• Using Credible to check prequalified rates is 100% free
• Checking rates has no impact to your credit score
• Wide range of loan options to fit your individual needs
How Loan Term Impacts Borrowing Capacity
As you think about how much to borrow, consider how the length of your loan term impacts affordability and overall costs.
A longer term increases your borrowing capacity, since the monthly payment is lower and reflects a smaller percentage of your DTI. But spreading out payments can dramatically raise the total interest you pay on the loan; plus it keeps you in debt longer.
Here’s an example using a $25,000 loan at a 12% interest rate for a borrower with a monthly income of $5,000. We’ll look at two different term lengths to see how monthly payments, total interest and DTI vary.
Table Header
| Term Length | Monthly Payment | Total Interest Paid | DTI |
|---|---|---|---|
| 3 years | $830.36 | $4,892.88 | 17% |
| 5 years | $556.11 | $8,366.67 | 11% |
Consider how much you’re willing to pay in total. Then think about your other financial goals and the timeline you have for them. Do you want to buy a house one day? Do you have extra cash flow to pay for your child’s education? A five-year personal loan may not feel like a long time at the beginning, but it’s important to think about what stages of life you’re about to enter and how that extra debt will affect your options in other areas.
What’s Your Goal?
Buy A Home
Discover mortgage options that fit your unique financial needs.
Refinance
Refinance your mortgage to have more money for what matters.
Tap Into Equity
Use your home’s equity and unlock cash to achieve your goals.
Calculating Your True Borrowing Power
There’s a lot to consider when figuring out the right amount to borrow. These steps can help you estimate a comfortable amount to borrow based on your own guidelines, not just the lender’s.
- Start with prequalification. Most lenders offer an online prequalification tool. It gives you a sneak peek of your potential loan terms (including interest, monthly payment and loan amount) without having a hard pull on your credit report. Use the information as a starting point.
- Test variables with a loan calculator. Once you have an interest rate to work with, use a personal loan calculator to see how changing the loan amount and term affects your monthly payment and total repayment cost. Your rate may change depending on these factors, but you’ll get approximate estimates to work with.
- Compare each option to your budget. Look at the different payments you calculated and see how they fit into your budget. Find the loan amount that keeps your payments manageable and the total cost comfortable. Then you’re ready to apply for the amount that truly makes sense for you.
Get A Personal Loan Today
Find a lender that can help you find the right loan terms for your financial situation.
Common Mistakes When Getting A Personal Loan
Avoiding these common mistakes can help the loan repayment process a lot smoother and less financially burdensome.
- Borrowing more than you need: Just because a lender offers you a certain loan amount doesn’t mean you need to take it. Adjust the amount you borrow based on what you actually plan to use the funds for (without tacking on a vacation or shopping spree).
- Ignoring fees: In addition to interest, lenders may also charge origination fees, prepayment penalties and other charges. Read the loan terms carefully so you know exactly how much you’ll pay over time.
- Not creating a budget: Taking out a loan without a monthly budget may mean you don’t actually have a repayment plan. Although lenders analyze your other debt payments, they don’t know what other financial obligations you have. It’s up to you to make sure you really can afford those payments.
Looking for Access To Money?
Just answer a few simple questions and we’ll help you find the funds you need.
FAQ
The Bottom Line: Choosing How Much To Borrow For Future Success
Sometimes applying for financing makes you feel like you’re the one being evaluated. But it’s just as important for you to evaluate the lender, fees and loan amount you’re offered. You have the power to shop around, analyze rates and fees, and calculate the loan amount that truly works for your financial well-being.
Ready to explore your options? Compare personal loan rate options to see what may be available to you.
Lauren Ward
Lauren Ward is a writer with over a decade of experience covering financial topics for businesses and publications. Her work has also been featured in major publications such as U.S. News and World Report, CNN, Business Insider, The New York Post and Bankrate. Her expertise includes real estate, mortgages, small business, insurance and more.
