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Every now and then, you may want to take out a personal loan to cover a planned or unexpected expense. With a personal loan, you can receive a lump sum of money upfront and repay it over time via fixed monthly payments or installments over an agreed-upon term. But how much will a bank lend you for a personal loan? Keep reading to find out.

Common personal loan amounts

There is no shortage of lenders who offer personal loans. While some offer larger amounts than others, most will allow borrowers to borrow anywhere between $1,000 and $50,000. Some lenders will even approve the most qualified borrowers for a $100,000 personal loan, but they’re less common.

Factors that will determine how much you can borrow

Your financial situation will help lenders decide what loan amount to approve of you. In most cases, lenders will consider the following:

Your credit score

Your credit score is a three-digit figure that shows how likely you are to pay off debt. The higher your credit score, the more responsible a borrower you are in a lender’s eyes. While lenders prefer solid credit, some may approve you for a sufficient loan, even if your credit is on the lower side.

Your income

When you apply for a personal loan, a lender will likely ask you to share your monthly or annual income. Your income can come from a traditional full-time job, self-employment, alimony, Social Security, retirement accounts, or any other sources. It can give them an idea of what type of payments you can comfortably handle. The more you earn, a lender might be willing to lend to you.

Your debt-to-income ratio

To calculate your debt-to-income ratio, divide your monthly debt payments by your monthly gross income. This figure shows how much of your income goes toward debt. Lenders generally look for a ratio of no more than 36%. If you have a high debt-to-income ratio, you may not be able to borrow as much money because lenders may worry you won’t have enough income to cover all your debt payments, including your personal loan.

How to increase your chances of a higher loan amount

Fortunately, there are some steps you can take to get approved for a larger loan, including:

  • Get a secured loan: Since a secured loan is backed by collateral or an asset you own, it’s less risky for a lender. If you default, the lender has the right to seize your collateral. You’ll be more likely to borrow more money if you choose a secured loan instead of an unsecured loan.
  • Apply with a cosigner: if you have a friend or family member with strong credit and income, you can ask them to cosign a loan. This can help you get approved for a large loan that you might not be able to take out on your own.
  • Improve your credit: If your credit isn’t in the best shape and your loan can wait, do your best to improve it. Pay your bills on time, keep your debt levels low, and don’t close old accounts.

The Bottom Line

There are a variety of factors that will determine how much the bank, or another lender will lend for a personal loan. By becoming familiar with what they are, you can get a good idea of what you may qualify for.

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Contact Information:

Name: Keyonda Goosby Email: [email protected] Job Title: Consultant

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