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How much you can borrow with a personal loan depends on the lender you're working with, your credit history and other factors. As you determine how much to borrow, you'll also want to consider how much you can afford in monthly payments and what the interest rate will cost you over the life of the loan.
If you're considering a personal loan and are trying to decide how much to borrow, here's what you need to know.
What Is the General Range of Personal Loans?
Personal loans come in all sizes, with some lenders offering under $100 and others up to $100,000. This range doesn't determine how much you'll be approved for, though. And the amounts can depend on the type of personal loan you choose.
Most small-dollar personal loans, for instance, are short-term loans from online and payday lenders. These loans are typically accessible to people across the credit spectrum, but they often charge exorbitant fees and interest rates and provide short repayment terms.
In contrast, many loans designed for people with better credit scores typically have higher minimum and maximum loan amounts. These loans also generally come with longer repayment terms, which can give you more breathing room with your repayment plan.
Which Factors Affect My Personal Loan Amount?
Each lender has its own set of criteria for determining loan amounts. But in general, here are some of the primary factors:
- Lender's loan offerings: Even among lenders with similar loan terms and credit requirements, you may see a wide range of loan amounts. For example, SoFi offers loans ranging from $5,000 to $100,000, while Marcus loans go from $3,500 to $40,000. Both lenders offer loans to people with good to excellent credit scores.
- Credit score: Your credit score is an essential element in the loan underwriting process. The higher your credit score, the less of a risk you pose of defaulting on your loan. As a result, you may qualify for higher loan amounts if you have a good score than someone with a low credit score could. Many personal loan companies also have minimum credit score requirements.
- Credit history: In addition to your credit score, lenders will review your credit report for other factors that may indicate potential risk. If your credit score is decent but you have significant negative items on your credit report, such as missed loan payments or accounts in collections, it could hurt your chances of qualifying for a larger loan.
- Income and debt: Another factor lenders consider when you apply for a loan is your ability to repay it. To determine this, they'll look at your annual income—there's typically a minimum income requirement—as well as your debt payments. Lenders will calculate your debt-to-income ratio (DTI), or how much of your monthly gross income goes toward debt payments, to get an idea of your ability to make another monthly payment and how large a payment you could handle.
Because every lender is different in how it considers each of these factors, it's a good idea to shop around and compare multiple loan offers to improve your chances of scoring a better one. Experian CreditMatch™ allows you to get prequalified and compare loan offers from multiple lenders through one place based on your credit profile.
Consider the Monthly Payment You Can Afford
Just because a lender determines that you can afford a certain loan amount based on your credit profile, income and debt, it doesn't mean you should take the maximum offered.
Use a personal loan calculator to help you calculate a loan's payment based on the amount, interest rate and repayment term, as well as how much you'll pay over the life of the loan including interest charges.
Then check your budget to decide whether you can afford the expense. Making loan payments can limit your ability to achieve other financial goals, so make sure you're prioritizing how you use and spend your money.
Try Improving Your Credit Before You Apply
If your credit score is already in great shape, you may decide to move forward and apply for a loan. If your score isn't where you want it to be, though, think about whether it's worth it to wait and build your credit before you apply.
Depending on how much you can increase your score, you could save hundreds or even thousands of dollars in interest.
Here are some tips to help you improve your credit:
- Check your credit score to see where you stand.
- Get a copy of your credit report to determine which areas you need to address.
- Dispute inaccuracies on your credit report, if applicable.
- Get caught up on past-due payments.
- Pay down credit card balances.
- Avoid taking on new credit unnecessarily.
- Ask a family member with a strong credit history to add you as an authorized user on one of their credit card accounts.
- Use Experian Boost™† to get credit for your on-time phone, utility and Netflix® payments.
The process of building your credit can take time, but the long-term benefits can be well worth the effort and wait.