Personal Loan

Top Factors that Affect Your Personal Loan Amount


Introduction: A personal loan is an amount of money borrowed from a bank or financial institution to meet emergencies or unexpected needs. An instant personal loan is a great option to arrange funds for weddings, holidays, medical emergencies, higher education, etc. It is to be noted that a personal loan is an unsecured loan, which means no collateral is needed to acquire funds. 

The amount of personal loan you need is influenced by a lot of external factors, like your income and employment status, credit rating, history of defaults, any existing debts, and your relationship with the lender.

Top Factors That Affect Your Personal Loan Amount: 

  1. Income: Your income is the primary component that determines your loan amount. It is a widely acknowledged fact that those with a large disposable income have a higher ability to pay back loans than those with less income. It is common practice in the lending market that people who have regular disposable incomes tend to get lower rates of interest for their loans. This may have a different effect on people with lower incomes.
  2. Employment Status: The lender may take into consideration the borrower’s employment status, as this may influence the probability of repayment. If the borrower has a secure job with a stable income, he may be able to get a higher loan amount sanctioned.
  3. Credit Score: Your credit score is a big factor in whether or not a lender will give you a personal loan. It also affects how much you can borrow and how much you’ll pay in interest on an instant personal loan.

You could be deemed a risky borrower, and your loan amount may be cut if your credit score is lower than 650. Keep your credit rating in good standing and make your payments promptly for any debts that you have.

Limit the number of credit applications you submit, since this could cause a drastic decrease in your credit rating. Instead, focus on improving your credit line on existing accounts, as that will prove you’re able to pay back a loan.

  1. History of Defaults: If the borrower has a previous history of defaults, the lender may be skeptical about offering a higher loan amount. So if you are hoping to borrow a bigger loan amount, you must maintain a sound credit history. 
  2. Relationship with the Lender: Lenders tend to be more accommodating regarding the amount of loan and interest they charge a reputable customer. Because of their long-standing and reliable relationship with each of their customers, they have a high degree of interdependence. The trust that they build doesn’t happen in a single day and requires an extended period of time and responsible behavior by the customers of the bank to maintain their loyalty. When lenders from institutions or individuals recognize your loyalty to them, they’re much more likely to give you an offer that is more feasible than the one new customers receive.
  3. Loan Interest Rate: The term “interest” refers to the amount that is incurred when borrowing money, which is shown in percentages of the amount of the loan. If, for instance, you take out a loan at 10 percent of the loan’s worth, the loan will be due to the lender or the bank every year, in addition to the principal amount.

Naturally, a high interest rate means that the loan you are taking out will have a much higher APR than if you were eligible for a low-interest loan. The interest rates can vary greatly depending on your circumstances as well as other aspects, which is why you must consider your options carefully.

  1. Loan Amount: The interest rate is calculated as a percentage of the loan’s amount. The more you borrow, the more you pay in interest. Because you must pay back both interest and principal, a higher amount can result in greater monthly installments.

Therefore, it is recommended that you only borrow the amount you require and try to avoid borrowing more than what is needed.

  1. Repayment Period: This is the time it will take to repay your loan and can be affected by your monthly payment and the total costs.

You might be able to spread your repayment plan over a longer period of time to reduce your monthly payments. The loan might appear to be more affordable; however, if you decide to go with this approach, you’ll be paying more.

How to Improve Your Allowable Personal Loan Amount

To increase the credit limit for personal loans, we have a few suggestions:

  • Get Your Credit Score Up: If your credit score is not high, you can work on improving it by decreasing the amount of debt you have, paying your bills promptly, and disputing any errors that appear on your credit file.
  • Improve your income: If you can, take a job that pays more or work extra hours. The more you earn, the greater your chance to receive an appropriate loan to meet your requirements.
  • Reduce Your Debt: The lower the amount of debt you have to pay off, the more you’ll be able to take out. Think about loan consolidation using personal loans to ease the burden of debt repayment with less interest.

This all helps increase your instant personal loan limit to allow you to get the funds you need to accomplish whatever you want, such as the consolidation of your debt, making a major purchase, or for any other reason.

 The Bottom Line

Now that you know all the things that can change the amount of your personal loan, you know how to change the amount of your instant personal loan. Working on your credit score, making more money, and paying down your debt may be important steps to take if you want to get a bigger personal loan.