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Personal loans can be useful for major expenses like home repairs, debt consolidation, or weddings. They have flexible loan terms and often carry lower interest rates than credit card debt. Better yet, they’re unsecured loans, which means you don’t have to put up collateral to borrow.
Although borrowers can take out a personal loan for a variety of reasons, the maximum loan amount available from most lenders is $100,000 or less. How much you can actually borrow depends on the lender you choose, and, sometimes, the purpose of the loan.
This guide will walk you through how much you can borrow on a personal loan, how to get the maximum personal loan amount, and when you shouldn’t get a personal loan.
In this review:
- Personal loan limits by lender
- Your credit affects how much you can borrow on a personal loan
- Who should consider a large personal loan?
Personal loan limits by lender
|Lender||Maximum personal loan amount|
As you can see in the table above, limits vary widely by lender, but generally, the maximum amount you can borrow from any mainstream lender is $100,000, while others don’t top $20,000.
You will receive the loan in one lump sum and then make monthly payments. Most borrowers won’t need the maximum loan amount and should only borrow what they actually need to avoid unnecessary debt.
Your credit affects how much you can borrow on a personal loan
There are two major factors that affect how much you’re eligible to borrow: the lender you qualify for and your debt-to-income ratio.
>> Read more: How Do Personal Loans Work?
The lender you qualify for
The better your credit is, the more likely you are to qualify with a good-credit lender. These lenders (which can be found in the top half of the table above) generally offer higher loan amounts, since their target customers are presumably in a good enough financial position to pay that money back.
If you only qualify for a fair or bad credit lender (seen in the lower half of the table), your maximum loan amount will probably be lower, since those lenders tend to issue smaller loan amounts to offset their risk.
>> Read more: Best Personal Loans & Rates
Your debt-to-income ratio
Another factor that could affect your total loan amount is your debt-to-income ratio (DTI). Your DTI, which is also a major component of your credit score, indicates what percentage of your monthly income is eaten up by debt payments.
Different financial institutions impose different maximum DTI requirements, but most like to see your DTI remain below 36% with your requested loan included. If you’re applying for a loan that would push you above that limit, your lender might counteroffer with a lower loan amount.
Who should consider a large personal loan?
Personal loans can be used for almost anything, so they are a great resource for large, justifiable expenses. But borrowing the maximum loan amount shouldn’t be considered for non-essential expenses.
Your own circumstances and financial situation will dictate when you should or shouldn’t consider a large personal loan, but here are a few conditions that may indicate whether it makes sense.
You may consider a large personal loan if you:
- Have a good-to-excellent credit score.
- Have a low debt-to-income ratio.
- Have an emergency expense.
- Want to consolidate other high-interest debts into one payment.
- Need to fund a major event like a wedding or a funeral.
- Need to make home improvements that will increase the resale value of your home.
You should not consider a large personal loan if you:
- You have poor credit.
- You have a high debt-to-income ratio.
- Want to fund a vacation.
- Want a non-essential big-ticket item.
- Cannot afford the monthly payment under your current budget.
Taking out a five-figure loan is a big deal; it should be a necessary option or something that minimizes your debt (consolidation) or increases an investment (home repairs).
Be mindful that taking on more debt can cause your credit score to drop and make it more difficult to qualify for other financial products in the future.
Consider a secured loan
If you need to borrow a very large amount of money and you don’t have the creditworthiness necessary to qualify with the best lenders, you could also consider a secured loan. This means you will put up something up as collateral that guarantees the loan.
Secured personal loans bring down annual percentage rates and help borrowers qualify more easily. Just be aware that the property you put up as collateral is on the line if you default on the loan.
Get pre-qualified quotes from a few lenders, then compare limits, loan payments, and interest rates before going through the full loan application process. This way you know you’re getting the best deal, and you avoid multiple hard inquiries on your credit report.
Author: Stephanie Sasseen