Taking out a personal loan is a common way to get money to pay down high-interest credit card debt or finance large home-improvement projects. In the first quarter of 2022, more than 20 million Americans owed money on personal loans, credit-reporting agency TransUnion reports.
Balances on those personal loans totaled $178 billion — a modest sum compared to the whopping $841 billion Americans owed on their credit cards in the first quarter of the year. Although the average balance of new unsecured personal loans was just $6,658, many people take out very large personal loans – those between $50,000 and $100,000.
Learn how large personal loans work and get insight into qualification guidelines, loan limits, and other information that can potentially help you secure find the best personal loan when you need to borrow a large amount.
Why Get a Large Personal Loan? What Can It Be Used For?
Both large and small personal loans occupy a unique space in personal finance because you can use the money for just about whatever you want.
Home and auto loans are directly tied to those assets, but personal loans can be used to fund anything you want, from a globe-trotting vacation, a new kitchen remodel, emergency expenses, or to pay off high-interest credit card debt.
Large personal loans are loans that exceed $35,000. Depending on your credit history, income, and existing debt obligations, you may be able to secure a large personal loan with a favorable interest rate that could save you thousands of dollars in interest payments versus high-interest debt.
Why a Large Personal Loan Instead of a Credit Card or Home Equity Loan?
Debt consolidation is a primary reason to take out a large personal loan, especially if you owe $50,000 or more in credit card debt.
Depending on your credit limits, you could use your credit cards to fund large purchases, but you’ll end up paying tens of thousands more in interest since the average interest rate on credit cards is 16%.
Interest rates on large personal loans vary by borrower qualifications, but for the sake of comparison, we’ll use 10%.
Here’s an example of how much money you could save by taking out a personal loan versus using your credit cards:
Credit Card
Personal Loan
The example for personal loans doesn’t include loan origination and other lender fees. However, you still can get a clear picture of how bad of an idea it would be to use credit cards to fund a $50,000 purchase versus taking out a large personal loan with a better interest rate.
Bumping up your credit card payment helps immensely, but it also puts more stress on your monthly budget.
Additionally, most large personal loans are unsecured, meaning you don’t have to put up any assets as collateral against the loan. In the event of a default, your creditor can’t seize your personal assets on an unsecured loan. Borrowers often turn to home equity lines of credit for large loans, but that’s basically taking out a second mortgage and using your home as collateral.
Large personal loans come with fixed payments over the life of the loan, so you’ll always know what you need to pay each month to service the debt regardless of wider interest rate movements.
How Can You Qualify for a Large Personal Loan?
All forms of borrowing require more or less the same set of criteria, though qualification standards can vary greatly between personal loan lenders.
Creditworthiness
For starters, you have to demonstrate creditworthiness. The higher your credit score, the less risk you represent for potential lenders.
Applicants seeking large personal loans of $50,000 or more should have a credit score of at least 720. However, if your credit score is 750 or higher, you’ll likely get loan offers with better interest rates than less-qualified borrowers.
Stable income
You’ll also have to demonstrate a stable employment history. Having a W2 job is crucial since it’s dependable, regular, and verified income that can pass strict loan underwriting standards. Gig workers, independent contractors, and freelancers who document their income using a Form 1099 will likely find it much harder to qualify for a large personal loan regardless of their credit scores or monthly income.
Debt obligations
Potential lenders will pull your credit score through a major credit reporting agency so they can look at your existing debt obligations to make sure you have enough money to service any new debt. Lenders will add up your existing debt and divide it against your income to arrive at your debt-to-income ratio, or DTI. As an example, borrowers with a DTI greater than 43 percent likely won’t qualify for a mortgage loan; however, lending standards are slightly different for large personal loans.
How to Get a Large Personal Loan
Most large national banks don’t even offer unsecured personal loans. Credit unions historically offer personal loans with favorable terms for qualified borrowers, while online lenders that offer large personal loans only cater to the highest tier of qualified borrowers.
Regardless of where you begin the process, you’ll need to provide pay stubs, proof of identity, and proof of residency such as a utility bill.
Most lenders allow you to complete the process online and upload all the required documentation.
Lenders will do a hard pull of your credit to get a credit score and also determine your DTI.
Borrowers seeking large personal loans of $50,000 to $100,000 may have to find a consignor (co-borrower) in order to qualify or to secure a more favorable interest rate.
Here’s an idea of how much you would pay each month and in total interest if you borrowed $50,000, $75,000, and $100,000 with varying interest rates:
$50,000 Personal Loan
$75,000 Personal Loan
$100,000 Personal Loan
Pros and Cons of Large Personal Loans
There can be benefits and drawbacks to taking out a large personal loan.
Large Personal Loan Pros & Cons
Frequently Asked Questions (FAQs)
Here are three commonly asked questions about large personal loans.
How much will the loan cost?
The amount of interest you’ll pay over the life of the loan is determined by its interest rate — a higher rate means higher payments and more money paid in interest.
Do personal loans have fees?
Many personal loan lenders charge a one-time loan origination fee, which could be a significant amount of money for very large personal loans. Other lenders don’t charge fees outside of interest on the loan balance.
Will a personal loan negatively affect my credit?
Like any form of debt, a personal loan will appear on your credit score. Carrying too much total debt could lead to a lower credit score. Making your loan payments on time could raise your credit score.
