Factors That Can Affect Your Allowable Personal Loan Amount
A personal loan is a loan that you can use for any purpose. Personal loans generally incur lower interest rates than credit cards, so they can be a good choice if you need to borrow money.
Before deciding on a personal loan, you should calculate how much the loan will cost you. This includes the interest you will pay on the loan and any fees associated with taking out the loan. Once you know all of this, you can decide if the total cost of the loan is something you can handle.
Four major elements can affect the cost of borrowing. Understanding them will help you decide if a personal loan is good for you.
1. Loan Interest Rate
Interest is the cost it takes to borrow money, shown as a percentage of the loan amount. For instance, if you borrow at 10 percent interest of the loan’s value, you’ll have to pay that to the bank or loan agency each year, on top of the principal loan amount.
Obviously, a high interest rate indicates that your personal loan will be substantially more expensive than if you qualify for a low-interest loan. Interest rates might vary significantly depending on your circumstances and other factors, so make sure to weigh your options carefully.
2. Loan Amount
Since interest is calculated as a proportion of the loan amount, borrowing more implies paying considerably greater interest. Because you must return both principal and interest, a larger loan total will result in much higher monthly payments.
As such, you should borrow only what you need and avoid borrowing more than is required.
3. Repayment Period
This is the time it takes to pay off your loan and will be affected by both your monthly payments and total charges.
You may be able to spread out your payback schedule over a longer period to lower your monthly payment. The loan may appear more reasonable, but if you choose this option, you will end up paying a lot more.
4. Credit Rating
Your credit score is critical in whether lenders approve a personal loan and will affect the loan amount and interest rate.
You may be considered a risky borrower, and your loan amount might be reduced if your credit score falls below the mid-600s. So, keep credit card balances low and make all payments on time for any debts you incur.
Also, limit the number of new credit applications you make, as this can cause a sharp drop in your credit score. Instead, increase your credit line on current accounts as this proves that you are able to repay whenever you borrow.
How to Improve Your Allowable Personal Loan Amount
To improve the allowable personal loan amount, here are some tips:
- Get Your Credit Score Up: If your credit score is low, you can work on improving it by reducing your debt, paying bills on time, and disputing any errors on your credit report.
- Increase your Income: If you can, get a higher-paying job or work overtime. The more money you make, the more you’ll get a favorable loan for your needs.
- Lessen Your Debt: The less debt you have, the more you’ll be able to borrow. Consider loan consolidation via a personal loan to make debt repayment easier at lower interest rates.
All of this helps improve your allowable personal loan amount, so you can get the money you need for whatever purpose, whether it’s consolidating debt, making a large purchase, or anything else.
Each of these factors must be carefully thought out. If you want to keep your borrowing costs low, choose a loan with a low-interest rate, a small loan amount, and the shortest time frame you can handle for paying it back. In addition, keep your credit score as high as possible if you want to get a personal loan without any trouble.
For fast online loans with no credit check, you can rely on King of Kash. We specialize in quick loans for bad credit ranging from $100 to $5,000, so even if your credit is less than perfect, you can still get approved. Try us out today and allow us to gain your loyalty and trust!
Cary Silverman is a consummate entrepreneur having sold multiple companies during his 20 years of business experience in the financial industry, but for him, it isn’t about the money. His success is rooted in his passion to focus on doing something better today than it was done yesterday. These days, he’s the CEO of Waldo General, Inc. that oversees the operation of King of Kash.