Personal loans can help fill the gap when you need to pay for something big but don’t have the savings to cover the expense. Loan amounts typically range from a few hundred to thousands of dollars, so it pays to do your research and find out how much you may qualify for.
The typical range you will find for a personal loan is $1,000 to $35,000, although there are some lenders with loan amounts up to $50,000 or $100,000. How much you can borrow depends on several factors, including your credit score and the reason you’re taking out the loan. Lenders tend to favour applicants with credit scores of 650 or higher, but you can still borrow if you have bad credit.
Although you’ll be able to borrow the amount you qualify for, this might not be the smartest move. The easiest way to figure out how much you can afford to borrow is to do some basic calculations. Start with your monthly income and regular expenses. If you have any excess income, this could be used as your loan repayment.
At the end of the day, the amount you borrow depends on your needs. Don’t borrow more than you need since you’ll pay interest on the amount you borrow.
Compare maximum loan amounts from different lenders
What do lenders consider when evaluating my application?
Lenders consider several factors when making a decision on whether or not they’ll fund your loan. These include:
Your loan purpose. Many lenders will ask what you plan to use the loan for. The purpose may affect the interest rate you’re offered. If you’re consolidating debt or paying for car repairs, this may be looked on more positively, than say, paying for a vacation.
Credit score. While your credit score is not the only deciding factor, it carries a lot of weight. Look at the minimum credit score requirements of a lender before you apply.
Debt-to-income ratio (DTI). If you already have a significant amount of debt, a lender may see you as a liability and will be less likely to lend money to you. Try paying down your existing debts before taking out another loan if you think this might be an issue. Aim to have a DTI of 40% or lower.
Your education or career. Some lenders will consider your college education or career as part of your loan approval. Often income will play a factor, since you need to be able to make your loan repayments.
How to get the maximum amount of a personal loan
When you need to borrow a large amount, there are no guarantees that you’ll get the funds you’re looking for. However, following some of these tips may help you score the loan amount you need.
Improve your credit. Raising your credit score can be a slow process, but it can help you get financing down the road – for more than just a personal loan.
Lower your debt-to-income ratio. Paying down your existing debts will lower your expenses and show that you can afford to take out a new loan.
Wait until you have established employment. Having a secure source of income, especially if it’s with a distinguished employer, can help show lenders you’re able to pay for your loan.
Look into a secured loan. Offering collateral can increase your chances of approval by decreasing the risk for the lender. You can also usually score a lower APR with a secured loan since you’re offering up collateral.
How to compare lenders
There’s a lot more to a loan than just the maximum amount you can borrow. Keep these factors in mind when comparing your options:
Interest rate. As one of the most important factors when you’re looking at a loan, the interest rate determines how much the loan will cost you.
Fees and other charges. While the APR will include any upfront fees and the interest rate, you should still ask about any additional fees including administration fees, early repayment charges, late fees and other costs that could surprise you.
Loan terms. Typically the longer the loan term, the smaller your monthly repayments. However, a longer loan term also means more interest payments and a more expensive loan overall. Consider taking a shorter loan term if you can make the repayments, since the loan will be cheaper overall.
Eligibility criteria. Take a look at the required eligibility for a lender so that you can focus on the lenders you’re more likely to qualify for.
Loan uses. Some lenders put limits on what you can use a personal loan for, so make sure that any lender you’re considering will let you use the loan the way you need to.
Before applying for a loan, research a variety of different lenders in order to find favourable rates and terms that meet your personal needs. Check that you meet the eligibility requirements and have the necessary documents on hand in order to speed up the application process.
Limits for personal loans vary from lender to lender. When you’re looking to finance your next big step — be it a big purchase, a home renovation or something else entirely — consider more than just the amount you’re offered. It’s important to compare your loan options so you can find the right loan for your budget and your needs.
Frequently asked questions
You can use your personal loan for just about anything. Common purposes include debt consolidation, home renovations and making large purchases. Certain lenders may limit your loan use – for instance, some may not allow you to use a personal loan on secondary education costs – but in general how you use your loan funds depends entirely on your needs, as long as they’re used for legitimate purposes.
Some lenders offer pre-approvals that allow you to get your interest rate and terms and see what amount you could qualify for. These pre-approvals typically don’t require a hard credit check and won’t affect your credit score.
The maximum amount you qualify for will vary by lender, as well as your own personal situation including your credit score and your current debts.
In some cases, yes. You’ll find lenders that allow consecutive borrowing, but they may limit the total amount you can borrow or alter the prerequisites you must meet.
Examine your budget to determine whether you can afford more than one loan. Missing payments could hurt your credit score and your ability to get financing in the future.
Contact your lender immediately. It’s often better to let the lender know beforehand and possibly work out a plan, than to simply incur the late fee and any penalties. Try to keep an open line of communication between yourself and the lender.
Yes, some lenders will allow cosigners for personal loans.
Emma Balmforth is an Associate Editor at Finder. She is passionate about cryptocurrency, credit cards and loans, and enjoys helping people understand the often confusing world of finance. Emma has a degree in business and psychology from the University of Waterloo. She wants to help people make financial decisions that will benefit them now and in the future.
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