The maximum amount a borrower may be able to obtain from a personal loan will depend on their credit score, spending history, payment history, and other financial data. Thinking of a personal loan but unsure whether it will be enough to cover your expense or purchase? The great thing about personal loans is that they range quite a bit in funding amount and so, can work for a wide range of expenses. In general, there isn’t a maximum amount for a personal loan, it depends on a few different factors including the finances of the borrower. Continue reading to learn more about the maximum loan amount works for a personal loan along with more information on personal loans in general.
What Are Personal Loans?
Personal loans can be secured or unsecured loans, however most of the time they are unsecured. In early 2023, unsecured personal loan balances rose to $225 billion.1 As mentioned above, these loans can be used for all kinds of expenses. Generally, you’ll get the funds in a lump sum once you are approved, and then you can use them however you like. When it comes to repayment with these loans, you will likely repay it in equal monthly installments, 30 days after receiving the funds. One thing to keep in mind is that these credit accounts aren’t revolving and are different from lines of credit. You’ll get the funds upfront and if you need more money while repaying your personal installment loan, you will have to apply for a brand new loan option.
Personal Installment Loan Breakdown
| Factor | Description | Impact on Maximum Loan Amount |
| Loan Term | The duration over which the loan is to be repaid. | Longer terms can sometimes lead to higher maximum funding amounts as the payments are spread out over a longer period, making larger loans more manageable. |
| Market Conditions | Economic factors such as interest rates and lending market trends. | In a favorable economic climate, lenders might offer higher maximum loan amounts due to lower risk. Conversely, in a tight market, maximum amounts may be lower. |
| Lender’s Policy | Each lender’s internal policy and risk assessment criteria. | Different lenders have varying policies on maximum loan amounts, influenced by their risk tolerance and business model. |
| Employment History | The stability and duration of your employment. | A stable and long-term employment history can positively influence lenders to offer higher loan amounts, reflecting a stable income source. |
| Loan Purpose Specificity | How specific the purpose of the loan is (e.g., debt consolidation, medical expenses, education). | Loans for more specific and urgent needs, like medical expenses, might have different maximum amounts compared to general personal installment loans. |
| Co-applicant’s Financial Profile | The creditworthiness and financial stability of any co-applicant. | Adding a co-applicant with a strong financial profile can significantly increase the maximum loan amount, as it lowers the risk for the lender. |
| Previous Relationship with Lender | Your history and relationship with the lender. | A positive and long-standing relationship with a lender can lead to higher loan amounts due to established trust and reliability. |
| Geographical Location | The borrower’s location, as lending laws and economic conditions vary by region. | Some regions may have higher loan amounts due to economic factors or local regulations. |
| Type of Employment | Whether the borrower is self-employed, salaried, or a business owner. | Salaried individuals might get higher loan amounts due to perceived stability, while self-employed individuals might face stricter scrutiny. |
Where Can I Find a Personal Loan?
You can find a personal with financial institutions like banks and credit unions. You can also find them with online lenders, which you will likely get more flexibility with when it comes to approval.
What Do I Need for a Personal Loan?
In general, to get a personal installment loan you will need to have some income, and be able to prove different things to your lender. When you are ready to apply for a personal installment loan, you should have a few different things”
- A Government issued photo ID — a driver’s license, passport, military ID, etc.
- Proof of income — to prove income you can use documents like bank account statements, pay stubs, etc.
- Proof of residency — to prove your residency you can use pieces of mail, utility bills, lease or mortgage agreements.
- If the personal installment loan is a secured loan then information about the asset will be required.
- Sometimes references may be requested from a lender.
Do You Need Good Credit for Personal Loans?
Although good credit can make it easy to get approval and a higher loan amount through a personal installment loan, it isn’t required for you to have good credit. Many lenders may offer funding to bad credit borrowers as long as you have the ability to repay the loan.
What Variables Impact Maximum Personal Loan Amount?
A few variables will impact max loan amounts with personal loans. And knowing more about them will be helpful when you begin your search for loans, here are those factors:
Your Income
Your income is a huge factor that will help determine how much you will get with a personal installment loan. The higher your income, the better chances you have at getting a higher loan amount. And so, it is extremely important to show proof of all your income sources when you submit a loan application.
Your Credit Score
Your credit score shows a lender a snapshot of credit history and is a large part of the loan amount process with a personal installment loan. According to CNBC, the average credit score in America is 716.2 Lenders may be less hesitant to give a large amount of funding to borrowers who have less than perfect credit scores. And so, before you apply for a personal installment loan, make sure you do all you can to improve your credit if you have the time to wait, before you apply for a loan.
The Lender
The lender is an important part of the application process when considering personal loan amounts. Some lenders operate on a smaller scale than others, and so may not be able to offer as much funding as another lender. And so, make sure to look at several lenders before making a personal installment loan decision.
Your Ability to Repay the Loan
Your ability to repay the loan encompasses a few different factors including your income and your monthly bills. Lenders will look at this to figure out the loan amount you can afford when it comes to the monthly payments. If you are unsure about what the monthly payment will be you can ask your lender after pre approval or you can use a personal loan calculator when you have the loan amount, interest rates, and repayment terms for an estimated monthly payment. Your debt to income ratio will be looked at when they pull your credit report.
Do I Need To Borrow More Loan Funds Than I Need?
So as you know by now, personal loan limits can range quite a bit. And let’s say that you get approved for more money than the requested loan. You should know that you never have to borrow more money than you need from a personal loan.
How To Improve Your Chances of Getting a Higher Loan Amount
If you are applying for a personal installment loan and you don’t have the best credit or a high income, there are things you can do to improve your chances of getting the amount you need from a personal installment loan option. Here are some tips:
Add a Cosigner or Co-borrower To Increase Your Maximum Personal Loan Amount
A co-signer and co-borrower is a third party you can add to your loan to increase your chances of approval along with the potential to get more funding from a personal installment loan. Your cosigner or co-borrower will need to have good or excellent credit to be able to help. Keep in mind that a cosigner will not be responsible for paying the loan unless you cannot repay it. While a co-borrower will share the responsibility of equal monthly installments until the loan is paid back in full.
Decrease The Amount of Debt You Have
Your debt will impact several different factors with your credit score and your ability to repay a loan, which are huge variables for personal installment loan approval and loan amount. And so, it will be extremely helpful to decrease the amount of debt you have before applying for a personal installment loan. There are several ways to go off debt payments, you can start small by simply paying back more than the minimum amount due on your bills. Or you can go as large as debt consolidation or a balance transfer option for your credit card balances. Debt consolidation and balance transfers can help with high monthly payments and annual percentage rates.
Increase Your Credit Score for a Higher Loan Amount
If your credit score range falls below 600 then you will have a difficult time securing funding. And so, for the best chances to get approved for your requested loan amount try and improve your credit scores. The best way you can do this is tackling it several different ways. For example, paying off debt, paying your bills on time, and avoiding new credit accounts will all be helpful to build or improve your score. With a better score you can also look forward to a better interest rate and flexible repayment.
Figure Out Whether a Personal Loan Is the Right Option for You
Depending on your expense of purchase, a personal installment loan may be the best option for you. For example, if you are a business owner then a business loan may work better. If you need to make major home improvements, a home equity loan will likely work better.
Increase Your Income
Income is another important variable that impacts how much you could get with a loan. And so, if your income isn’t enough for the funding you need, then consider a second part-time job or contract or freelance work. Even a small boost to your income could be enough for a lender to approve your initial loan amount.
Figure Out if the Expense or Purchase Can Wait
One practical way to approach your expense or purchase, is to simply figure out whether it can wait. If you aren’t facing an emergency, then consider whether you can wait and save up for the entire or part of that cost so you don’t have to worry about borrowing as much money or any money at all.
FAQ: Loan Amounts
Consolidating debt can positively impact your eligibility for a higher loan amount. By consolidating, you potentially lower your debt-to-income ratio, making you a more attractive candidate for lenders. This can lead to approval for a larger loan amount, especially if the consolidation results in more manageable loan payments.
The interest rate on a personal installment loan is typically fixed, meaning it doesn’t change over the life of the loan. This ensures that your loan payments remain consistent. However, if you opt for a variable-rate loan, your interest rate, and consequently your loan payments, can fluctuate based on market conditions.
Yes, secured loans often have higher loan amounts compared to unsecured loans. This is because secured loans require collateral, reducing the lender’s risk, and therefore, they are more willing to lend larger amounts.
Your debt-to-income ratio is a key factor lenders consider when determining your loan amount. A lower ratio indicates that you have a good balance between debt and income, potentially qualifying you for a higher loan amount. A high ratio might limit the amount you can borrow.
Absolutely. A strong credit history typically leads to higher loan amounts as it indicates to lenders that you have a track record of managing and repaying debts responsibly. Conversely, a weaker credit history might result in lower loan amounts or higher interest rates.
Consistently making larger than minimum payments on existing loans can positively impact your credit score and credit history. This, in turn, can increase your eligibility for higher loan amounts in future loan applications.
Generally, once a personal loan amount is set and disbursed, it cannot be increased. If you need additional funds, you may need to apply for a new loan or explore other financing options.
The purpose of the loan can influence the amount you can borrow. For instance, loans for specific purposes like home improvement or consolidating debt might have different approval amounts compared to general-purpose personal loans.
Yes, demonstrating stable and sufficient income can positively affect the loan amount you’re eligible for. Lenders are more likely to offer higher amounts if they are confident in your ability to make consistent loan payments.
While loan amounts are typically based on set criteria, you can discuss your needs with the lender. If you have a strong financial profile or existing relationship with the lender, they might consider adjusting the loan amount.
CreditNinja’s Thoughts on Personal Loans
Thinking about a personal loan but unsure if it will be enough for what you need. There really isn’t a cap on personal loan amounts; it will depend on the lender and your financial situation—your credit score, income, and ability to repay the loan. Once you apply for pre-approval you will get a rough estimate of how much you can borrow. If you aren’t seeing the loan amounts you need, the good news is that there are several things you can do to improve your chances of getting a large personal loan. CreditNinja also encourages you to also consider whether you can wait to save up for your expense rather than paying for it through a loan option!
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