How much you can borrow with a personal loan and the repayment period are dependent on a number of factors. Not only does the choice of lending institution impact these factors, but the type of loan—whether secured or unsecured— will impact how much you can borrow with a personal loan and for how long.
Personal loans are often unsecured and depending on a variety of variables (e.g. your credit rating, debt, income and the lender). Usually range from as little as $100 to $50,000 with repayment periods between 12 to 60 months. Secured loans, while not as common, can be for a maximum of $250,000 with a repayment period of 120 months.
Personal Loans: Overview
Personal loans can come in a variety of amounts and payment periods. If you have the right financial characteristics, you can acquire loans for thousands of dollars or even tens of thousands of dollars. And while the period of repayment can vary, all personal loans operate on a fixed repayment period. However, what you may not know is that just as you can face a penalty for failing to complete your payments within that fixed period, you can also face a penalty if you complete your payments sooner than the fixed period. These early payment penalties are known as prepayment penalties. Understanding your loan, how much you can borrow with a personal loan, the amount to repay and how long you agreed to pay it back, is fundamental to avoiding these unnecessary early payment fees.
When signing on a loan, the possibility of prepayment penalties is probably the furthest thing from your mind. But being cognizant of these fees is just as important as being cognizant of penalties associated with delinquent payments. In this article, we will take a closer look at these prepayment penalties, as well as some personal loan options that are available out there. Because they can be an unexpected part of personal loans, we will start with the prepayment penalties themselves.
No matter what type of personal loan you may be seeking it is important that you be aware of the associated prepayment penalties. Personal loan prepayment penalties are charged by your lender on the occasion that you repay your loan earlier than negotiated. How much you can borrow with a personal loan, the length of time you have to pay it back, and prepayment penalties are all critical factors when deciding to secure a personal loan.
As hard as it may be to believe, personal loan prepayment penalties are a common concern when it comes to lending. As counter-intuitive as it may appear, there are fees actually associated with paying off your loan earlier than was negotiated. Though these fees are of little benefit to the borrower, they are quite obviously intended more for the benefit of the lender. While you personally may see it as a sign of fiscal responsibility to pay your loan off early, this actually represents lost income on interest for your lender.
To ensure that they are able to maximize profit via the interest on your loan, lenders use personal loan prepayment penalties. And while your state laws may require your lender to provide you of advanced notice of these penalties, there are no guarantees that this is the case. It is always best to inquire with potential lenders before signing.
How Much you Can Borrow with a Personal Loan
Hopefully, you are now alerted to the nature of personal loan prepayment penalties, and the possible consequences of paying your loan off early. So let us turn now to matters of how much you can borrow on a personal loan, and how long you have to pay that back. The reality of the matter is that when you’re looking to acquire a personal loan, the following factors impact the process: The prospective lender(s), your income, your debts, and your credit rating. Assuming the latter three are favorable, you can find yourself with some fairly attractive loan amounts and fixed payment terms. For example, Wells Fargo offers unsecured personal loans of $3000 to $100,000. With repayment periods of 12 to 36 months for loans less than $5000, and 12 to 60 months for loans greater than that amount.
Traditional lenders such as Citibank and Discover offer personal loans of $2000 to $50,000 and $2500 to $35,000 (with a repayment period of three to seven years in the case of the latter) respectively. Further examples include SunTrust Bank’s LightStream, which offers personal loans of $5,000 to $100,000 with repayment periods of two to seven years. Comparatively, a secured loan (using a CD or savings) from Wells Fargo can range from $3000 to $250,000 that can be repaid within a maximum of 120 months.
This brings us to our next and final point: personal loans come in two varieties, secured and unsecured. Secured loans require some form of collateral from you. They typically have lower interest rates than their unsecured counterparts and are also easier to be eligible for. But compared to unsecured loans they are far less common. Conversely, unsecured loans require no collateral from you (a benefit if you have trouble making payments). However, this also means that unsecured loans have higher interest rates. And though they are widely available, the application and approval processes can be somewhat stricter. You will need a good credit history for an unsecured personal loan. And, as a final reminder, personal loan prepayment penalties are often included.
The type of loan you select is dependent on your financial characteristics, but here’s a listing some of the best lenders and their personal loan products.