How much personal loan can I get?
2. Employment history
Stable employment can go a long way in improving personal loan eligibility and the amount of money you can borrow. The longer you have been in a job (or in a similar position at another company), the more secure your position will appear. While an employment history has nothing to do with your credit score, it is another tool that the best personal lenders use to decide how likely you are to repay your personal loan funds.
3. Income and debt ratio
One of the most important factors in determining how much you can borrow is how much you earn each month. Lenders want to get an idea of what your budget will look like once you add another monthly payment to the mix. One way for a lender to assess this is to check your debt-to-income ratio (DTI).
To calculate the DTI, a lender adds up your fixed monthly payments. This includes mortgage (or rent), auto loans, credit cards, and other personal loans. Once they have a total, they divide that number by your gross monthly income (the amount you earn before taxes and other deductions).
Here’s how a person can calculate their DTI:
Total monthly debt payments: $ 1,275
($ 850 mortgage + $ 325 car loan + $ 100 credit card)
Total monthly income, before tax: $ 5,000
DTI: $ 1,275 (monthly payments) ÷ $ 5,000 (monthly income) = 0.25 = 25%
In this case, the DTI is 25%. It is generally good to keep your DTI below 36%. While the maximum acceptable DTI varies by lender, it’s a good idea to keep yours as low as possible, especially if you want to qualify for a larger loan.
4. Secured loan vs unsecured loan
Most of the personal loans are unsecured loans. There is no collateral with an unsecured loan, so if you stop making payments, the lender cannot take any of your assets. (However, the lender can still sue you.) It can be difficult for some people to qualify for a large unsecured loan.
You may be able to borrow more with a secured loan. With a secured loan, you will bring something valuable as collateral. The bank can take possession of this collateral and sell if you do not repay the loan funds as agreed. You can usually borrow up to half the value of the collateral. If you have a car worth $ 20,000, you can probably get a loan of $ 10,000 by offering the car as collateral. Other examples of collateral for a secured loan include a car, savings account, retirement account, jewelry, or any other item of value you own.
How to qualify for a larger loan
If you qualify for a smaller than necessary personal loan, it is possible to increase the loan amount for which you are eligible. Here are some ideas for getting a loan for a larger amount:
- Shop multiple lenders
- Opt for a longer repayment term
- Enlist a co-signer
- Offer collateral (apply to a secured loan)
- Pay off existing debt
- Improve Your Credit Score
- Increase your income
We’ll cover them in more depth below.
Shop multiple personal lenders
It’s always a good idea to consider multiple lenders, but it’s especially important if you want a large loan. Get prequalified with multiple lenders to find out how much money each lender can offer. Prequalification shouldn’t have an impact on your credit score (lenders use what is called a “gentle credit check” to get a feel for your credit score), so it’s all about. ‘a risk-free way to rate the store.
Opt for a longer repayment term
If you need the cash quickly, ask about the extended repayment period. The longer repayment term will lead to lower monthly payments (meaning the lender may be willing to give you the loan you need). Be aware, however, that longer repayment terms mean paying more interest over time.
Enlist a co-signer
If someone in your life has an established credit history and an excellent credit rating, consider asking them to co-sign the loan. The lender will then decide eligibility based on your two credit scores rather than just yours. Remember: when someone is kind enough to co-sign a loan for you, they are putting themselves in danger. If you miss a payment, they have to pay. Just get someone to co-sign a loan that you are sure you can repay.
Offer collateral (apply to a secured loan)
As stated above, if you are applying for an unsecured loan (an unsecured loan), you may be able to increase your loan amount by offering collateral (or applying for a secured loan). And if you’re already offering a guarantee, offering something of more value could increase the amount you’re approved for.
Pay off existing debt
If you are not approved for the loan amount you need, ask the lender for an explanation. Your DTI may be too high. If this is the case, work on paying off your debts before applying for a personal loan again.
Improve Your Credit Score
Raising your credit score can help you get approved or get a bigger loan. One of the fastest ways to improve your credit score is to check your credit report for errors. For example, an error could mean that you missed a payment that you didn’t miss, or that you took out a large loan that you never requested. These can lower your score. To get started, order a free copy of your credit report, check for errors, and report them to the credit bureau.
For more information, see our guide: What credit score do I need for a personal loan?
Increase your income
A new job or secondary activity may make you eligible for a larger loan amount. It will likely take months to see the fruits of parallel work – and months longer to provide a lender with proof of your increased income. Still, if you need a loan for something big like a debt consolidation or home improvement project, it may be worth using the extra time to fill your checking account while you wait.
Still have questions ?
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