A personal loan can come in handy when you need to make a large payment, but you don’t have the money to cover the expense. Of course, you could use your credit cards, but if your credit limit is too low to cover the costs or you’re wary you’ll overspend, you can apply for a personal loan for a predetermined interest, a fixed term, and a pre-set monthly payment.
Personal loans are available from traditional lenders like banks and credit unions, but these institutions are known to have stringent requirements that lock out a good number of applicants. Thankfully, the lending industry has many independent lenders, from whom borrowers that don’t meet the minimum criteria set by conventional loan providers can get the money they need.
To make proper use of these loans and avoid costly mistakes, however, you need to know several things about how they work, among them being the amount you can borrow.
Your Credit Score Matters
Every firm you approach will have their individual low and high lending limits, but you can safely expect a range of between $1,000 to $50,000, with some companies offering loans up to $100,000. The amount you can qualify for depends on a list of factors, most notably your credit score. Providers decide for themselves the minimum score that an applicant must have to get the maximum loan amount, as well as the best interest rates and repayment terms. Nevertheless, if your credit score is 670 or higher, there’s a pretty decent chance your lender of choice will give you the full sum.
Many lending websites provide loan calculators as a self-help tool for prospective applicants to know how much they can borrow and how much it will cost them. The further your credit is from the lender’s comfort zone, the lower the amount you can qualify for, and the higher the interest rate the loan will bring.
Other Factors That Lenders Consider
Although credit scores carry a lot of weight, they’re not the only thing that lenders look at when evaluating the maximum amount to give a borrower. If your rating isn’t favorable enough to get you the sum you need, a loan provider may give your application a second thought if you have a steady income and a low debt-to-income ratio. Some lenders will also ask what you plan to do with the loan, and the more reasonable your purpose, the more money you will get and the less interest you’ll pay.
Loan approval processes vary from one provider to another, so, you may want to look for detailed reviews online to find the lender that will be most likely to consider your application.
How to Get the Most Out of a Personal Loan
When you need to borrow a significant sum of money, there’s no guarantee that you’ll get the full amount. However, there are steps you can take to improve your chances. Repairing bad credit can be a slow and demanding process, but if you’re planning for a future expense, you can begin to improve your score early. You can also go through your bank statements and identify the debts you have that you can afford to clear quickly, or perhaps wait until you have a secure source of income – stable employment or a flourishing business – before the time comes to apply for the loan.
Alternatively, you can opt for a secured personal loan. Offering collateral will mitigate the risk of lending to you, and therefore, convince the lender to give you your desired amount.
A personal loan can be an excellent option if you need to finance a pressing expense, but it’s the lender that will decide how much money you will get. Having good credit, stable income and few creditors will improve your chances of receiving the maximum amount. More importantly, however, ensure you only borrow what you can afford, even if you qualify for more.