A $50,000 loan limit is classified as a large personal loan by most lending standards. Typically, large personal loans are secured against an asset for collateral; for example, home equity loans may have high limits. If you would like to secure this large loan without collateral, you will be exposing both yourself and the lender to a large amount of risk. As a result, the lender will have more stringent requirements from you up front, and the cost may be high. By agreeing to these terms, however, you can potentially secure a $50,000 personal loan.
Provide an Excellent Credit Report
An unsecured loan of any size is rarely provided to an individual with low credit. If the borrower would fail to repay the debt, which is common with a bad credit borrower, it is unlikely the lender would recover the lost expense. As a result, excellent credit will be required for most unsecured personal loans. The only exceptions would be very small loans, such as pay check advances, which may not require a credit check. With a large $50,000 loan, a credit check will be run. You must pass with flying colors, such as a score over 720, in order to meet the first criterion.
Maintain Low Debt Limits
Even a good credit borrower can present risk to a lender if that borrower has a number of other debts. This applies not only to active balances on debts, such as a mortgage balance, but also potential credit limits. For example, if you have $100,000 of available credit on your current credit lines, you could potentially spend this money while your new personal loan is active. As a result, your personal loan payments would be much more difficult for you to make. Lenders will shy away from extending this large line of credit to you if you have high credit limits as a result.
Verify a High Income
If your income is high enough, you can significantly reduce the risk associated with your loan. For example, for a person earning $150,000 in a given year, a $50,000 loan could be repaid in a year or two. The income is considered as part of a ratio, however, not on its own. Your income will be compared to your current debt and your current assets. Therefore, you will qualify for higher limits if you are earning $150,000 this year and have only $20,000 of existing debt as opposed to $200,000 of existing debt.
Agree to Strict Terms
Once you qualify based on credit, debt ratios and income ratios, you will still pose a risk to the lender. The lender will ask you to compensate for this risk by agreeing to strict terms. These can include high interest rates, high monthly payments and high fees for missing these payments. You should consider these terms heavily before making a decision. Ask yourself what would happen if you lost your job or encountered a financial emergency. How long could you sustain the debt until it went into delinquency? The penalties on a delinquent, high limit personal loan can threaten your financial stability.
by Ethan Leak