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Getting a personal loan for a few thousand dollars can be fairly easy, especially if you have good credit.
But what if you need a significant amount, like $20,000 for debt consolidation, home improvements, a wedding, or another large expense? In that case, you may have to do a bit more legwork to find a loan that works for you.
You’ll likely need good to excellent credit to qualify for a $20,000 personal loan or to qualify for the best rates and terms.
Here’s what to know about finding and qualifying for a $20,000 personal loan.
Where can I get a $20,000 personal loan?
Not all personal loan companies make large loans. These are some of your best options to get a personal loan for a significant amount:
What sets online lenders apart from other personal loan options is convenience. The websites of online lenders are available 24 hours a day, and many allow you to apply online. What’s more, many online lenders make immediate decisions on your loan application, which is helpful if you need funds right away.
Generally, online lenders offer competitive rates, particularly if you have strong credit. Still, interest rates vary widely, so it’s a good idea to compare several loan offers for the best rate.
Might be good for: People who need cash quickly
Comparing prequalified rates from multiple lenders is simple using Credible.
The average interest rate on a two-year personal loan from a commercial bank is 9.46% as of February 2021, according to the most recent Federal Reserve data. While you may be able to find a much lower rate from an online lender, this rate is considerably lower than the average credit card interest rate of 15.91%.
Might be good for: People whose existing relationship with a bank may qualify them for loyalty discounts and attractive terms
Credit unions are nonprofit organizations, so they’re able to pass along lower rates for personal loans to their members. By law, credit unions can’t charge you an annual percentage rate, or APR, with interest rates higher than 18% for most personal loans.
Might be good for: People with less-than-perfect credit scores
How to apply for a personal loan
Before you apply for a $20,000 personal loan, you’ll want to research lenders to find out which ones are willing to extend the amount you need. Compare each lender according to their available interest rates and eligibility criteria. Don’t forget to factor in any fees, such as origination fees, which can be deducted from your available loan amount.
Prequalifying for a personal loan
Prequalification allows you to check the interest rates of multiple lenders without hurting your credit score. When you prequalify for a loan, you’ll discover what the bank will offer you in terms of interest rates, repayment terms, and fees.
To prequalify, you’ll fill out a form — often online — which may ask for some basic personal information and financial data.
During the pre-approval process, potential lenders may initiate a soft credit check, which won’t hurt your credit score. You’ll then receive a conditional rate offer based on the limited credit information the lender can glean from the soft credit pull. You’ll get a final offer once you formally apply for the loan.
What do I need to apply for a personal loan?
Once you select a pre-approved offer for a personal loan that suits your needs, it’s time to apply for the loan. The first step is to get your paperwork in order.
Before you fill out your final application, gather all the documents you may need. Because you may have to work with creditors, your employer and other parties to collect everything, allow yourself some time. Incomplete applications can slow the application process or produce an automatic rejection, so it’s essential to make sure you have everything you need in advance.
If approved, you’ll receive a formal offer. Ensure you understand the loan terms and conditions — including your interest rate and repayment plan — before you sign for the loan.
How long will it take to get my funds?
Generally, online lenders are very efficient in approving your loan and disbursing personal loan funds. You can usually apply online and get a quick decision. If you’re approved for a personal loan, you can typically expect to receive the funds within five business days. Of course, some lenders are faster than others, and in some cases you may be able to get your funds on the same or next business day.
If you accept a personal loan through a bank or credit union, you’ll usually receive your money within one to seven days. Funding times can vary and may depend on the financial institution and whether you’re an existing customer.
If funding time is a priority, include this factor in your research and apply with lenders that fund their loans quickly.
What should I look for in a $20,000 personal loan?
When you’re considering personal loan offers, pay particular attention to your bottom line. What’s going to cost you money and impact your ability to repay your loan comfortably? With personal loans, interest rates, repayment terms, and fees are the primary factors that affect the overall cost of your loan.
With Credible, you can research rates from multiple personal loan lenders.
The interest rate is the amount the lender charges you to borrow its money, and rates vary widely depending on the lender. Most personal loans are fixed-interest-rate installment loans, but if you borrow a variable-rate personal loan, remember that your monthly payment can change along with your interest rate.
Your credit score, your desired borrowing amount, and the repayment term also affect the interest rate you receive.
The APR is a more accurate indicator of a loan’s true cost, since the APR includes the interest rate plus any fees accompanying the loan.
You should also consider the repayment term, which is the time period for you to repay your loan. Typical repayment terms for personal loans fall between two and seven years.
As with most loans, the longer the repayment term, the more you’ll pay in interest. Typically, loans with the shortest repayment terms have the lowest rates.
Fees, discounts, and penalties
Many lenders impose various fees, adding to your loan’s overall cost. As you compare loan offers, read the fine print for applicable fees and penalties.
Among the most common fees are origination fees, which cover the cost of processing your loan application and disbursing the funds. Many lenders also charge late fees when you don’t make your payment by the due date, and return payment fees for insufficient funds.
Be aware, some lenders charge a prepayment penalty if you pay your loan in full before the repayment term ends. If you’re considering getting a loan through your existing bank, you may be able to snag a loyalty or relationship discount, so make sure to ask.
How much does a $20,000 personal loan cost?
The amount you’ll pay for a $20,000 personal loan — or any loan, for that matter — should never be a mystery. The federal Truth in Lending Act requires all banks, credit unions, and online lenders to inform you of the cost of a personal loan when you apply. Your documents should include the total cost of financing, including interest, fees, and a detailed schedule of the principal and interest for all payments during the repayment term.
Personal loan rates
Interest rates vary from lender to lender, and also depend on your credit score, income, and other factors. That’s why you often see lenders advertise their best rates with the disclaimer, “on approved credit.”
Many lenders favor borrowers with good or excellent credit scores (700 FICO or above), while other lenders work with borrowers with poor credit (639 and below). Generally speaking, the better your credit score, the more likely you are to receive personal loan offers with the best rates.
Personal loan fees
Personal loan lenders make their money through the interest and fees they charge. However, you can take steps to minimize the amount of interest and fees you must pay.
For starters, look for lenders that don’t charge fees. Many lenders market themselves as “no-fee lenders” who make it easy to apply for a loan. Still, even no-fee lenders may charge fees for late payments and returned checks.
Before you apply for a loan, read the principal and interest breakdown and the schedule of fees so you can accurately compare the total costs of a loan.
Monthly payments on a $20,000 personal loan
A personal loan calculator can help you see the impact of a credit score on the monthly and total payment amounts of a seven-year personal loan. Let’s compare consumers at opposite ends of the credit score spectrum: someone with poor credit vs. someone with excellent credit.
Borrower 1 has a credit score of 600 and qualifies for an interest rate of 26.62% on a $20,000 personal loan with a seven-year repayment term. Their monthly payment will be $527, and they’ll pay $24,279 in total interest over the life of the loan. At the end of their term, they’ll have paid $44,278 for their $20,000 personal loan.
Borrower 2 has a credit score of 770, and qualifies for an interest rate of 13.93% with a seven-year repayment term. Their monthly payment is $374 — $153 less than Borrower 1’s payment. Borrower 2 will pay $11,418 in interest over the life of their $20,000 loan, which is $12,861 less than Borrower 1.
The clear takeaway here is that better credit scores can deliver better interest rates, which significantly lower your monthly loan payment and maximize your overall savings.
What credit score do I need to get a $20,000 personal loan?
Although many lenders specialize in working with borrowers with lower credit scores, you’ll generally need a credit score of 620 or above to qualify for a personal loan. Also, qualifying for higher loan amounts usually requires good or excellent credit.
Here are the general credit score ranges:
Excellent (750 and above)
Good (700 to 749)
Fair (640 to 699)
Poor (less than 640)
Can I get a $20,000 personal loan with bad credit?
Qualifying for $20,000 is a lot harder for individuals with bad credit, but it’s possible. Be aware, however, that borrowers with bad credit will usually pay higher interest rates. That means the rate will be somewhere above 20%, which, as we’ve seen, leads to higher monthly payments and total interest costs.
To boost your loan approval chances, build your credit score before applying, or add a joint applicant or cosigner with good credit to your application. It’s also a good practice to prequalify with multiple lenders, which doesn’t affect your credit, but allows you to compare loan rates and terms.
Pros and cons of a $20,000 personal loan
Before you sign off on a $20,000 personal loan, you’ll want to review the loan’s rates, terms, and fees, as well as the pros and cons, including:
Makes it easy to consolidate credit card debt
Fixed monthly payments
Specific payoff date
Generally lower interest rates than credit cards
May charge additional fees, such as origination fees
Monthly loan payments are usually higher than credit card’s minimum payments
Harder to qualify for borrowers with poor or fair credit
Can sometimes take several business days for a loan to fund
Alternatives to a personal loan
By any measure, $20,000 is a sizable personal loan . And, while personal loans can be used for a variety of purposes, they may not be the best fit for you.
Here are a few loan and credit options you might consider as alternatives to personal loans:
Home equity loan
A home equity loan provides you with a fixed amount of money, which is secured by your home. If you’ve built up enough equity in your home, this loan may be a viable option.
Pros of home equity loans
Fixed interest rates
Lower monthly payments
Proceeds that can be used for any purpose
Cons of home equity loans
As collateral, your home is at risk
You must borrow a lump sum
Homeowners with poor credit or too much debt may not qualify
Home equity line of credit (HELOC)
A HELOC is a revolving credit account secured by your home. You can borrow for any amount, as long as it’s within your approved credit line.
A HELOC may be a good idea if you have equity available, and you can use it to fund improvements that up your home’s value.
Pros of HELOCs
Generally feature lower interest rates than credit cards and other types of loans
Only pay interest on what you spend
Cons of HELOCs
A minimum withdrawal amount may apply
May come with fees
Retirement plan loan
This loan allows you to borrow money from your retirement savings and repay yourself with interest over time.
Though a retirement plan loan is less risky than a home equity loan or HELOC, withdrawing money from your retirement account should generally be the last option. However, a short-term retirement loan may be a decent option if you can repay the loan quickly.
Pros of retirement plan loans
Doesn’t require a loan application or minimum credit score
Loan isn’t factored in as debt on your credit report
Cons of retirement plan loans
Borrowing limits may apply
Less in your account to invest, so you may miss out on investment gains
You can apply for loans on peer-to-peer lending platforms that will connect you with individual investors who finance loans. Peer-to-peer loans may be helpful to those who’ve been denied traditional loans.
Pros of peer-to-peer loans
Checking your interest rate won’t harm your credit score
Fixed interest rates and monthly payments
Cons of peer-to-peer loans
High interest rates for those with poor credit
Could face origination and other fees
Loan from family or friends
Getting a loan from a family member or close friend may be awkward, but it could save you money in interest charges. This type of loan could be a good idea if you’re confident it won’t cause a rift in your relationship.
Pros of family or friends loans
Low or no interest rate
More flexibility with due dates
Cons of family or friends loans
Possibility of strained relationships
No legal protection (a family member can change terms at any point)
Be sure to do your due diligence before applying for a $20,000 personal loan. It’s important to do your research and weigh all your options before committing to any new credit product.
Start your personal loan research with Credible, where you can compare rates from multiple lenders.
About the author: Tim Maxwell is a financial writer with over two decades of experience. Tim’s work has appeared in USA Today, Washington Post, Bankrate, LendingTree, Fox Business, Credible and more. He also publishes Incomist, a personal finance site that focuses on paying off debt by earning extra income in creative ways.