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How Much Can I Borrow With a Personal Loan?
If you need a personal loan, whether it’s to pay off debt, cover an emergency or any other reason, you might be wondering how much you can borrow. Lenders can set minimum and maximum borrowing limits for personal loans. The amount you’re able to qualify for can depend on different factors, including your credit score, income and what you plan to use the loan for.
Personal Loans: What Are the Borrowing Limits?
Every lender sets the bar differently when it comes to personal loan amounts. For example, you may find small personal loans that let you borrow just a few thousand or even a few hundred dollars. On the other hand, some personal loan lenders can offer loans of up to $50,000 or $100,000.
When comparing personal loan options, it’s important to look at the minimum and maximum borrowing amounts. This can help you decide which loans are potentially the best fit for your financial needs.
For example, say you need $1,500 to pay for a car repair. If you’re looking at different lenders, you can immediately eliminate any that have a minimum loan amount above $1,500. Likewise, if you need to borrow $50,000 to cover a major home renovation project, you could strike any lenders off the list that don’t extend loans up to that amount.
How Much Money Can You Get From a Personal Loan?
The answer to this question is a little trickier, since the amount you specifically are able to borrow is up to the lender. When deciding how much to loan you, lenders can consider all of the following:
- Your credit scores versus their minimum credit score for personal loan requirements
- Overall credit history
- Income and your debt to income ratio
- What you plan to use the loan for
Out of those factors, credit scores can have the most impact. While you don’t need a perfect credit score to qualify for a larger personal loan, a higher score can work in your favor. A good to excellent credit score shows that you’re responsible when borrowing money and repaying it. That could make you less risky in a lender’s eyes, which could translate to a larger personal loan amount.
A strong credit score can also mean getting a lower interest rate and/or paying fewer fees. That can translate to a lower annual percentage rate or APR, which represents your annualized cost of borrowing once the interest rate and fees are factored in. A lower APR can save you more money over the life of the loan.
How to Choose a Personal Loan Amount
When deciding how much to borrow with a personal loan, there are two things to consider:
- How much you need to borrow
- What you can afford to repay
Figuring out how much you need to borrow may be the easier step of the two. You simply need to evaluate what you plan to use the loan for, in terms of its cost. For instance, if you want to get a personal loan to plan a wedding, then creating a detailed wedding budget could give you a better idea of how much you need.
This can be a little trickier if you’re getting a personal loan to manage a financial crisis, such as an extended job layoff. In that scenario, you’d want to estimate your monthly expenses as accurately as possible and gauge how long you may be out of work to decide how large of a loan you’ll need.
The other piece of the puzzle is figuring out how much you can afford to pay toward your loan each month. This is where using a personal loan calculator can come in handy. You can enter in your estimated loan amount, repayment terms and APR to calculate how much your monthly payments are likely to be.
RELATED: What is an Unsecured Loan?
Get Your Credit in Shape and Prequalify
If you’re considering a personal loan, working to improve your credit score could help you qualify for a larger loan amount. Some of the best ways to raise your score include:
- Paying bills on time and getting caught up on past due payments
- Reducing your total debt load
- Disputing errors or inaccuracies on your credit report
- Leaving older credit lines open and holding off on applying for new credit
You could also potentially improve your credit score by increasing the limits on your credit cards. This can help improve your credit utilization ratio. The key is continuing to keep your balances low and not adding to your debt.
Getting prequalified for a personal loan can help you gauge how much you’ll be able to borrow. Prequalification typically involves a soft credit pull versus a hard credit check, so it won’t impact your credit score. And when you prequalify, you can get rate quotes from multiple lenders to help you decide which personal loan to pursue.
How to Use Personal Loans
Rebecca Lake is a freelance writer specializing in personal finance, credit and debt. She’s a contributor to U.S. News and World Report, Forbes Advisor and The Balance and her work has appeared online at CreditCards.com, MyBankTracker, Money-Rates.com and dozens of other top publications.