How Much Personal Loan Can I Get?

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2. Employment history

Permanent employment can go a long way in improving your creditworthiness and the amount of money you can borrow. The longer you are on the job (or in a similar job at another company), the more secure your position appears. While career history has nothing to do with your credit history, it is another tool that the best personal lenders use to help determine how likely you are to pay back personal loans.

3. Income and debt-to-income ratio

One of the most important factors in determining how much you can borrow is how much you are making each month. Lenders want to have a sense of what your budget will be if you add another monthly payment. One way a lender can gauge this is by checking your debt-to-income ratio (DTI).

To calculate DTI, a lender adds up your fixed monthly payments. These include mortgages (or rentals), car loans, credit cards, and other personal loans. Once you have a grand total, 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 taxes: $ 5,000

DTI: $ 1,275 (monthly payments) ÷ $ 5,000 (monthly income) = 0.25 = 25%

In this case the DTI is 25%. It’s generally good to keep your DTI below 36%. While the maximum acceptable DTI varies by lender, keeping yours as low as possible is a smart move – especially if you’re looking to qualify for a larger loan.

4. Secured Loan vs. Unsecured Loan

Most personal loans are unsecured loans. There is no collateral on an unsecured loan. So if you stop making payments, the lender cannot take anything of your property. (The lender can still sue you, however.) For some people, qualifying for a large unsecured loan can be difficult.

You may be able to get more credit with a secured loan. With a secured loan, you deposit something valuable as security. The bank can take possession of this collateral and sell it if you do not repay the loan as agreed. You can usually borrow up to half the value of the collateral. If you own a $ 20,000 car, you can likely get a $ 10,000 loan by offering the car as collateral. Other examples of collateral for a secured loan include a car, savings account, retirement account, jewelry, or anything else of value that you own.

How To Qualify For A Major Loan

If you qualify for a smaller personal loan than required, it is possible to increase the loan amount that you are entitled to. Here are some ideas on how to get a loan for a larger amount:

  • Buy one from multiple lenders
  • Opt for a longer term
  • Hire a co-signer
  • Offer collateral (apply to a secured loan)
  • Reduce existing debt
  • Improve your credit score
  • Increase Your Income

We will go into this in more detail below.

Buy in multiple personal lenders

It is always a good idea to consider multiple lenders, but it is especially important when you want a great loan. Get pre-qualified with multiple lenders to find out how much money each lender can offer. The pre-qualification shouldn’t affect your creditworthiness (lenders use what is called a “soft credit check” to get an idea of ​​your creditworthiness), so this is a risk-free way to rate the shop.

Opt for a longer term

If you are going to need cash soon, ask about an extension of the repayment deadline. Extending the repayment deadline will result in a lower monthly payment (which means the lender may be willing to give you the loan you need). Be aware, however, that longer repayment periods mean that more interest will be paid over time.

Hire a co-signer

If someone in your life has an established credit history and excellent credit history, you should ask them to sign the loan. The lender then decides on eligibility based on your two credit scores, not yours alone. Remember, if someone is kind enough to sign a loan for you, they are putting themselves at risk. If you miss a payment, you’re hooked for the money. Just ask someone to co-sign a loan that you are sure you can repay.

Offer collateral (apply to a secured loan)

As noted above, when you apply 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 already offer collateral, offering something of value can add to the amount that you are approved for.

Reduce existing debt

If you haven’t been approved for the loan amount you want, ask the lender for an explanation. Your DTI may be too high. If so, work on paying off debt before applying for a personal loan again.

Improve your credit score

Increasing your credit score can help you get approved or a larger loan. One of the quickest ways to improve your credit score is to check for flaws in your credit report. For example, a mistake could be that you missed a payment that you didn’t miss, or that you took out a large loan that you never applied for. These can pull your score down. First, order a free copy of your credit report, check for bugs, and report those bugs to the credit reporting agency.

You can find more information in our guide: What creditworthiness do I need for a personal loan?

Increase Your Income

You can question a new job or outside activity for a higher loan amount. It will likely take months to see the fruits of a part-time job – and months more to provide proof of your income growth to a lender. However, if you need a loan for something big like a debt consolidation or home improvement project, it may be worth taking the extra time to replenish your checking account while you wait.

Do you have any questions?

Here are some other questions we answered:

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