If you are looking into loans or have made the decision to take out a personal loan, you might be thinking “How much money can I take out?” Typically, determining the amount of a loan will depend on your goals, your lender, and your budget. Deciding to take out a personal loan is an important decision, and determining how much you can and should borrow can be daunting. Here at United Credit Union, we want to help you make smart decisions with your money and to make the borrowing process as easy and convenient as possible, so we’ve compiled this list of helpful questions to guide you in deciding what size loan you should choose.
What is the purpose of your loan?
First, you should determine why you are applying for a loan. What is your goal for the loan? Determining this will mean figuring out how much money you will need to cover your intended expense. Generally, when taking out a personal loan, you do so with a purpose. For example, you might be planning for medical expenses, debt consolidation, vacation plans, holiday expenses, or home improvement needs. The goals you have for the loan will determine how much you can and should borrow.
Who is your lender? What are their maximum and minimum loan sizes and interest rates?
After you figure out how much money you need and hope to borrow, you should determine the maximum and minimum lending sizes and interest rates offered by the bank or credit union you hope to use. Different lenders have varying rules and terms for how much they are willing to lend and there is no guarantee that you will be eligible for the maximum borrowing amount, so you should meet with your lender to determine if their loan limits will be a good fit for your goals. Typically minimum lending amounts will fall between $1000 and $5000, so if you plan to borrow less than the minimum loan size offered by your preferred lender, you might have to compare multiple lenders. Often, smaller, local banks and credit unions will have the flexibility to offer lower minimum loan amounts with some even offering minimum loans as low as $500. Maximum lending amounts are generally topped off at $50,000, with a few lenders maxing out at $100,000. If you wish to borrow more than your preferred lender’s maximum loan size, you will have to compare other lenders to find the best fit for you. In addition to how much money the lender can offer, you should consider their potential interest rates, or how much they will charge you for borrowing the money. A lower interest rate means that you will pay less in the long run, so you should compare the interest rates of potential lenders in addition to their available loan sizes.
How much can I qualify for? What can I afford?
Once you have decided how much money you need and who you want to borrow from, you should determine how much money you might qualify for and what monthly payment you can afford. When considering individuals for a loan, lenders review one’s credit score, income, and existing debt balances (such as mortgages, credit card balances, and vehicle notes). Lenders are typically more willing to offer their maximum loan amount to individuals with high credit scores and a low debt to income ratio. However, just because you have a less-than-ideal credit score does not mean you will not qualify for a loan; you just might not qualify for the maximum amount available. Thus, you will need to consider whether you need the maximum amount available or if a lower loan amount will work for you. As you decide how much money you should borrow, keep in mind that it is best to borrow the least amount possible in order to achieve your goal. Keeping your loans low and comparing interest rates and lenders will help you pay less overall.
At United Credit Union, we know that the loan process can be overwhelming, so we are here for you with helpful tips and competitive low rates. We are dedicated to helping you financially navigate with flexible options and loan assistance. Call us today at 903-595-3604 to hear how United Credit Union can help make your goals a reality.
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