How Big of a Personal Loan Can I Get — and Afford?

how big of a loan can I get

“How big of a loan can I get?”

When it comes to getting a loan for things like a car or home, the guidelines on what’s affordable to borrow are relatively clear.

But for unsecured personal loans, the situation is often murkier. That’s because it’s harder to figure out how much of a personal loan you can really afford.

A good first step is to look at your financial situation. However, there are some others questions you might need to consider before you can fully answer that.

Here’s what you need to figure out to keep your personal loan affordable.

How big of a loan can I get?

One way to figure out how much you can afford to borrow is to apply for a personal loan.

After all, it’s in the lender’s best interest to limit your loan to what is affordable. This limits the lender’s risk of losing money.

“From the lender’s view, your application should show your ability to comfortably make the monthly payment—whether that’s $250 or $750 per month,” says Michael Foley, Credit Officer, Personal Loans for online lender Earnest.

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“The lender wants to ensure you’ll be able to make your payments in a timely fashion and that you will still have a cushion in your budget so you can weather other unforeseen expenses or additional debt,” adds Foley.

That’s where the loan approval and verification process comes into play.

A lender verifies and weighs various factors before approving your loan request. These factors include your income, other debts you hold or are repaying, and other monthly expenses.

The lender then uses that information to determine what would be an affordable loan principal for your finances.

Keep in mind, however, that “what you might consider ‘affordable’ might be slightly different than the lender’s definition,” Foley explains.

Essentially, it’s possible you could be approved for a much higher loan than you’ve perhaps budgeted for.

Check Out Earnest Personal Loans Here

How much can I afford to pay each month?

At the end of the day, this a question only you can answer. A big factor to consider is your own disposable income and money management skills.

Your disposable income is the portion of your take-home pay that is left over after you cover all necessary living expenses. Or, as lenders call it, your “monthly free cash flow after taxes and other fixed obligations,” Foley says.

Ultimately, you decide how much of your disposable income you can devote to repaying a personal loan. For some people that could be as much as half. For others, it could be much less.

Once you’ve come up with the dollar amount you would be willing to pay each month, you can plug that monthly payment into a calculator. This can tell you how much of a principal you could get based on your desired monthly payment, repayment period, and interest rate.

How much do I make each month?

How much you earn each month will directly affect how big of a personal loan you can afford or be approved for. After all, you can only repay your debts with the money you earn.

“A typical approved applicant will have total unsecured debt of less than 30 percent of gross annual income,” says Foley.

So if you have a $50,000 annual salary, for instance, a $15,000 personal loan would be considered affordable.

If you already have other unsecured debts, however, you’ll need to take that into consideration.

Credit cards and student loans are some of the most common forms of unsecured debt. And if you’re already carrying a balance on these debt types, you might have less room to take out a new unsecured personal loan.

What is my debt-to-income ratio?

Another way to figure out how much personal loan you can afford is to consider the debts you’re already repaying.

Before deciding how much to lend you, lenders often compare the amount of your overall debt to your income. This is also known as your debt-to-income (DTI) ratio.

“Affordability may vary depending on total debt obligations such as your student loans, auto loan or mortgage, other fixed expenses, and requested loan term,” Foley explains.

Figuring out your debt to income ratio is pretty straightforward.

Divide your total monthly debt payments by your gross monthly income. Your monthly debt payments should include student loans, car loan, mortgage, credit cards, and any other debts.

So what is a favorable DTI?

“Affordability is viewed in the context of an applicant’s entire profile and may vary case-by-case,” Foley says. “Generally applicants with a debt-to-income of  less than 50% will have a higher chance of approval.”

What is my credit score?

Your credit score doesn’t directly affect how affordable a loan is. However, it does show how responsible you are with debts.

“In general, lenders want to see that applicants are using credit responsibly and are not overextending themselves,” Foley says.

Some “indicators” lenders look out for, according to Foley, may include “high credit card balances, recent delinquencies, or high DTI.”

If you’ve missed payments or had delinquent accounts in the past, those are big red flags to lenders. And it could be a sign that you need to pay more attention to your finances and develop healthier money management.

Some lenders are flexible when it comes to the credit scores of borrowers. For instance, Pave and Citizens Bank have minimum credit scores under 700 for personal loan applicants.

Other lenders like SoFi don’t have a minimum FICO score for personal loan borrowers. However, applicants with SoFi typically have a score of 680 or higher.

Start a SoFi Application Today

Would this loan stretch my finances thin?

At the end of the day, no lender will have the same up-close view of your finances that you will. Or be able to answer your question “how big of a loan can I get?” Only you can truly determine whether a loan will stretch your finances too thin.

Even if you’re not at risk of missing payments, a personal loan might not be affordable if it keeps you from saving money or working toward other financial goals.

“When seeking a personal loan, potential borrowers should not be calculating the maximum possible payment they can afford,” Foley points out.

Instead, Foley recommends that borrowers should consider “the principal and payment amount that they can live with while still comfortably meeting existing debt obligations and being prepared for a rainy day.”

“It is important to leave some cushion,” adds Foley.

On top of considering what you can afford, limit how much you borrow to what you actually need.

“Requesting just the amount you need will put less strain on your finances and increase your chances of approval,” Foley says.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (
  2. Personal LoansFixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 4.98% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 21, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.98% APR assumes current 1-month LIBOR rate of 1.34% plus 3.89% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
4.98% - 14.24%1$5,000 - $100,000
Check rate nowon SLH's secure site
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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