Table of Contents

    How Much Should You Borrow?

    At some point, most people borrow money for one reason or another. Whether it is to make a large purchase like a home, or simply because they do not have enough money to pay for monthly essentials, loans can play an important role in our lives. However, understanding how much to actually borrow can trip people up and send them into unmanageable debt.

    Things To Consider

    Before deciding on how much to borrow, it is important to understand the different types of credit that allow you to access money to make purchases. 

    Installment loans, such as mortgages, auto loans, and personal loans, are fixed amounts of cash that either go straight towards a defined purpose or are received as cash for you to put towards something specific. You pay this loan back in pre-agreed installments with added interest payments on top.

    Credit cards, on the other hand, are revolving lines of credit that allow you to borrow, spend, repay, and borrow again in a monthly cycle only limited by how much the issuer makes available on the card for purchases.

    Below, we look at the key factors that should guide you when deciding how much you should borrow and ultimately how much debt you should expose yourself to.

    What Is The Money For?

    The most important consideration is to identify the aim of taking out a loan. There needs to be a specific purpose like investing in home improvements, consolidating an existing debt, or opting for a medical treatment.

    You can determine how much exactly you need once your goals are clear. For example, if you are struggling with debt repayments and want to take out a personal loan for bad credit with the purpose of debt consolidation, you must calculate exactly what your cumulative debt amounts to across your credit cards and loans. Only then, borrow the exact same amount without being tempted to borrow a little more for unplanned purchases. 

    What Amount Do You Qualify For?

    The exact amount you qualify to borrow will depend on factors like your credit score and history. You can expect a bigger loan at better rates and terms if you have a good score. Therefore, understanding your credit score in advance will help you identify the sum you can borrow.

    Lenders have varying ranges of how much and to whom they lend, but you cannot expect to qualify for the maximum amount with every lender. They consider a lot of factors, which also includes the risk of lending to you.

    Your existing debt and current income are important factors considered by lenders besides your credit score. You need to look for alternative ways if lenders do not approve your loan for the maximum amount.

    You might consider a cosigner, as your combined scores and history can help the lender change their mind. Another alternative is to clear your existing debts, so that the risk factor of lending to you decreases.

    What Are The Lenders Minimum And Maximum Amounts?

    Start contacting lenders about the maximum amount they can offer after you identify your needs. There is no guarantee they can offer you the amount you need.

    Online lenders, banks, and credit unions have different rules and regulations for the minimum and maximum amount they offer. You can expect lenders which underwrite a personal loan to offer a maximum of $50,000 and start lending from as little as $500. 

    Your options will always be more limited if the sum you want to borrow is around the minimum or maximum amount offered by a lender. Restricted choices would also mean that you might not qualify for a loan with favorable rates and terms. You may have to rework your requirements in such a case. 

    What Will You Be Paying Monthly?

    Your monthly repayment amount depends on the total you borrow. You will have to repay more if you borrow a bigger amount.

    If you borrow a loan of $10,000 with an interest rate of 10% for four years, you will have to repay around $254 per month. If you borrow double the amount and keep the other factors the same, you will have to repay $508. 

    If you cannot afford larger payments, you may be able to stretch out the repayment term. However, it is important to note that the total interest amount increases with every increase in the repayment term. You might pay less in the present, but ultimately more overall to clear the debt.


    Borrow only what you truly require, irrespective of your financial goal. Debts can lead to stress and anxiety. To maintain a healthy and stress-free life, you should ensure that your debts are always based on need and not impulse with manageable repayment terms.