Getting a $ 100,000 personal loan isn’t easy, but it is doable. How to qualify
Most personal loans come in relatively small amounts: the average personal loan balance is $ 16,458, according to Experian, and Ted Rossman, senior industry analyst at CreditCards.com, says most personal loans are likely in the $ 5,000-25,000 range. But some lenders – like Lightstream and Sofi – offer personal loans up to $ 100,000.
Rossman says these factors are most important to qualifying for one: your creditworthiness, income, debt-to-income ratio (which refers to how much you owe each month compared to your income), and other factors that the likelihood that you will repay them. “It is even more likely that you will be approved at 720+ or even 740+. The lender will also want to make sure that you have enough income to make the monthly payments and that your overall debt to income ratio is not too high, ”Rossman says.
While lenders often ask why you are getting a personal loan, they are much more concerned about whether or not you will be paying back. An excellent credit rating, which consists of multiple credit accounts with a long history, is a big green light for many lenders, according to experts. And NerdWallet personal loan expert Annie Millerbernd added, “A strong, steady income and low debt also shows the lender that you have the means to pay back that large amount of cash.”
Rossman says people are most likely to get these larger loans for major home improvements. “I could also think of scenarios that involve a debt consolidation and maybe even something like financing a business or paying for a wedding – not necessarily a $ 100,000 wedding, but part of the appeal of personal loans is that the borrower has a lot of flexibility in using the money, ”says Rossman.
What Are Personal Loans Best Used For?
In general, personal loans that are available in one lump sum are best for large, one-off expenses. “Debt consolidation, a single sweep of all of your unsecured debt, is a great use for a personal loan when you are getting a lower interest rate than you paid before,” says Millerbernd. Rossman says the best reasons for taking out a personal loan are to consolidate credit card debt at a much lower interest rate, or if you can qualify for a low interest rate (ideally lower than a home loan, for example) to finance home improvement. “Qualified borrowers shouldn’t have a problem getting a large loan to pool or consolidate their credit card debt,” says Millerbernd.
“I would be less excited about using a personal loan for discretionary, temporary, intangible things like weddings and vacations,” says Rossman.
Although every lender is different, lenders generally do not place too much emphasis on the purpose of your personal loan. “It’s more of a formality for filing. They shouldn’t lie, of course, but they probably won’t keep in touch with you about how exactly you spent the money, ”says Rossman. “Of course, if you tell them you want $ 10,000 on the Vegas craps tables, it could be a reason to turn you down.”
How to choose a personal loan lender
Choose the lender with the lowest rates and fees. Note that some private lenders are more specialized than others. “For example, Payoff focuses on personal loans to consolidate credit card debt. And LightStream is promoting lower interest rates on personal loans used to buy cars than those used for education, ”Rossman says.
Note that a personal loan is not always the best option. “The average HELOC rate is 3.88% and if you have strong credit you could probably get a little closer to 3%. With great credit, you’d likely expect around 5% on a $ 100,000 personal loan, so the HELOC may be a more affordable choice, although you are putting your home as collateral, so that’s a risk to consider, “says Rossman .