Who qualifies for a personal line of credit? (2024)

Who qualifies for a personal line of credit?

Generally, you need at least good credit to qualify for a PLOC and a score well into the 700s to get the best rates.

To qualify for a line of credit, you will have to meet the lender's standards, which typically include proving your creditworthiness with a minimum credit score, sufficient income, and other factors.

To land one, you'll need to present a credit score in the upper-good range — 700 or more — accompanied by a history of being punctual about paying debts. Similar to a personal loan or a credit card, an unsecured personal line of credit gets bank approval based on an applicant's ability to repay the debt.

Usually requires good credit: Lenders often require good or excellent credit (a score of 690 or above) to qualify. Interest rates and monthly payments aren't fixed: PLOCs usually have variable APRs, meaning monthly payments can fluctuate over time.

While specific credit requirements for a personal line of credit vary by lender, you need at least a good credit score of 670 or higher to access the best interest rates.

This allows them to look at your history from the past seven years and see whether you've typically made payments on time. For a $30,000 loan, you'll typically need a credit score above 600 just to qualify or above 700 to get a competitive rate.

To calculate the monthly payment on a $50,000 HELOC, you need to know the interest rate and the loan term length. For example, if the interest rate is 9% and the loan term is 30 years, the monthly payment would be approximately $402.

You may be disqualified from opening a HELOC if you do not meet the lender requirements. This may include low equity in your home, inadequate income or a low credit score.

A credit limit is the maximum amount you can use via a financial product or service. On the other hand, a credit line is a credit facility that allows you to withdraw funds up to a specific limit and repay as per the terms decided between you and the lender.

While there's no universal minimum HELOC income requirement, lenders will consider your personal cash flow along with other factors to evaluate your ability to repay any debt you incur on the credit line. Income and employment verification for HELOC applicants typically involves submitting pay stubs or tax returns.

Why is it so hard to get a line of credit?

You can certainly get declined for a line of credit, especially if you have a low credit score and a history of defaulting on payments. The best way to prevent getting declined is to improve your credit score by doing things like always paying your bills on time and increasing your credit history.

Lenders often have higher credit score requirements for lines of credit compared to personal loans. For example, borrowers should aim to have a minimum credit score of 670 when applying for a line of credit. However, there are personal loans available that don't post a minimum credit score requirement.

Like credit cards, a line of credit is considered revolving debt and treated similarly when generating your credit score—if you make your payments in full and on time, it will reflect positively in your credit score. In this article, you will learn: How lines of credit work.

Requirements for a $20,000 Personal Loan

This means they'll want to see your credit score, income level and DTI ratio. Requirements vary by lender, but most lenders require borrowers to have a credit score in the good to excellent range — meaning a score of at least 670.

Opening a personal LOC usually requires a credit history of no defaults, a credit score of 670 or higher, and reliable income. Having savings helps, as does collateral in the form of stocks or certificates of deposit (CDs), though collateral is not required for a personal LOC.

You'll have the best chance of getting approved with an excellent credit score, such as one above 800. You may struggle to find a lender that will approve a $50,000 loan for folks with poor or bad credit. A "poor" credit score is considered 580 or under. Most lenders require at least a "fair" score of around 670.

You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

Lower interest rates

While home loan interest rates overall have risen dramatically since 2022, HELOC rates still tend to be lower than those on credit cards and personal loans. If you qualify for the best rates, a HELOC can be a less expensive way to consolidate debt or finance a home renovation.

What is the monthly payment on a $100 000 HELOC?

When you apply for a HELOC, lenders typically require an appraisal to get an accurate property valuation. That's because your home's value—along with your mortgage balance and creditworthiness—determines whether you qualify for a HELOC, and if so, the amount you can borrow against your home.

High debt levels

In addition to your credit score, lenders evaluate your debt-to-income (DTI) ratio when applying for a home equity loan. If you already have a lot of outstanding debt compared to your income level, taking on a new monthly home equity loan payment may be too much based on the lender's criteria.

What do I need to bring for a HELOC loan? In addition to a qualifying credit score and sufficient equity, you'll need to provide documentation to verify your income and financial history. This can include recent pay stubs, two years of tax returns, bank statements and a current mortgage statement.

Experts advise against using loan money to buy stocks—you can possibly lose the money and be stuck with a loan you can't afford to repay. You should also avoid using a HELOC to invest in luxuries like vacations, since the money will be gone quickly without an asset to sell if you end up needing the money down the road.