How much can I borrow for a personal loan?
There are a few considerations that come into play when determining how much you can borrow with a personal loan, including how much you can afford and your loan purpose. Ultimately it comes down to the type of loan you apply for.
At RateSetter, we offer personal loans powered by peer-to-peer lending. You can borrow between $2,001 to $45,000 over 1 to 5 years. These personal loans fill the gap when you need to pay for a major expense but don’t have the savings to cover the cost. You can choose a secured or unsecured personal loan, both of which offer benefits.
Our secured personal loans attract lower interest rates but come with additional fees to cover the cost of registering our security over the asset. With an unsecured personal loan, no assets are used as security against the loan.
You can choose whether you wish to secure your loan as part of the application process
How do lenders calculate personal loan eligibility?
Lenders consider several key pieces of information when approving your loan amount:
- Your loan purpose. If you’re applying for a loan to borrow a car, the loan amount will be tied to the car’s value. If you’re applying to consolidate debt, this will also be tied to how much debt you have. Lenders will also consider how risky the loan purpose is. For example, taking out a loan to go on holiday is riskier than buying a car because you don’t have anything physical to show for your spend.
- Your income and assets. Your ability to afford the repayments is determined by how much you earn and your current outgoings, such as expenses and other debt commitments. You will need to provide information about these as well as financial statements. The lender will also check your credit report.
- Debt-to-income ratio. If you already have a significant amount of debt, a lender may see you as a liability and will be less likely to lend money to you. Try paying down your existing debts before taking out another loan if you think this might be an issue.
Before you submit an application for a personal loan, it’s a good idea to know how much you can borrow. Applying for an excessive amount can lead to your application being rejected or see you stuck with repayments you can’t afford.
What is a small personal loan?
A small personal loan is a form of credit that is generally between $100 and $2,000. These loans differ from regular personal loans in that they usually have shorter loan terms and have more flexible lending criteria. They are offered by non-traditional lenders (most banks have a minimum personal loan amount of $5,000.
At RateSetter, our secured and unsecured personal loans start from as low as $2001. This can be just enough to cover a surprise vet bill, an auto repair or a busted pipe. This small personal loan can also be used towards big ticket expenses such as home renovations or a family holiday.
Sebastian has over 12 years experience in consulting, marketing and finance. He has worked with Australia’s largest banks and emerging fintechs across lending, investing and insurance. Sebastian has a Bachelor of Commerce and Bachelor of Laws with Honours.
How do I get a personal loan?
The first step in applying for a RateSetter loan is to request a RateEstimate. Your RateEstimate is an initial assessment of your eligibility to apply for a loan with RateSetter. It provides you with the estimated fees, charges and interest rate that may apply to your loan, taking into account a number of factors including your proposed loan term, amount, purpose and personal credit history
Requesting a RateEstimate won’t impact your credit score and there’s absolutely no obligation for you to proceed with a loan application. It’s free, secure, and will only take 1 minute to complete. To be eligible for a RateSetter loan you must
- Be aged 21 or over
- Be an Australian citizen or permanent resident
- Be earning over $25,000 per year from a regular source of income that you can demonstrate
- Have a good credit history
RateSetter will consider a loan application if you are self-employed. Additional credit assessment criteria and requirements may apply.
Are personal loans taxable?
Money received from loans are tax exempt, but they can be subject to income tax under certain conditions. Personal loans are not considered income for the borrower unless the loan is forgiven. In other words, you cannot be taxed on loan proceeds unless the lender grants the borrower a reprieve on paying back the debt owed. This is known as loan forgiveness. In the event a loan is forgiven, the proceeds associated with the original loan are considered “cancellation of debt” (COD) income. COD income can be taxed.
Can I increase my personal loan amount?
If you need a bit extra, you can apply to increase your existing personal loan. You can do this easily by completing an online application. If approved, you’ll continue to have one loan amount and one repayment schedule. Depending on how much your repayments are increased by you may want to extend your loan terms during this process.
Can I take out a home loan after a personal loan?
A personal loan’s impact on your home loan application depends on whether you have the means and ability to meet both repayments. Existing personal loan commitments are factored into your home loan application by repayments being included in serviceability calculations.
Some lenders use a calculation known as ‘debt-to-income’ (DTI) ratio, which determines the percentage of your monthly income (before tax) that gets eaten up by debt and household expenses. In general, the lower your DTI ratio, the better your odds of getting approved.
What does conditionally approved mean for a personal loan?
When a lender conditionally approves a personal loan it means the loan will stand unless you fail to meet the stipulations the lender lays out. A conditionally approved loan comes after a pre-approval and before a fully approved personal loan.
Conditional approval comes once you have provided the necessary documentation to get your loan set up and verified and once an underwriter has dug a little deeper into your circumstance. At RateSetter we pride ourselves on reviewing loan applications in a fast and frictionless manner. It takes just five minutes to submit an application. Once we have received all required documents we aim to provide you with an outcome within 2 business days.
If we approve your loan application, you will have two weeks to accept the loan before your approval is no longer valid. If you need additional time, please contact us.
This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.