How To Get A $20,000 Personal Loan (2024)

Whether you’re looking to renovate your home, consolidate debt or pay for another big expense, you may be in the market for a personal loan. Many lenders offer $20,000 personal loans that you can use for almost any purpose; some lend up to $100,000. To borrow such a large sum, however, you may need good credit and a steady income.

Follow these five steps to get a $20,000 personal loan.

1. Consider Qualification Requirements

Before pursuing a loan, it’s useful to understand borrowing requirements. Here are some factors that lenders typically consider when evaluating your application for a $20,000 personal loan:

• Credit history. Personal loan lenders review your credit history before approving you for a loan. Your credit history reveals your past and present accounts, including loans and credit cards. If you have negative marks, a lender may see you as a risky borrower and reject your application. You can review your credit reports for free via AnnualCreditReport.com. If you see any errors, try disputing them before applying.
• Credit score. A lender also considers your credit score, which is a numerical representation of your credit history. Credit scores range from 300 to 850, with good scores starting at 670. Requirements vary by lender for personal loans, with some requiring a score of 560 and others looking for 660 or higher. You can check your credit score for free with a credit monitoring service or through some credit card providers.
• Income. Lenders look at your income to ensure you’ll be able to pay back the loan on time and in full. When you apply, you’ll likely need to upload pay stubs, W-2s or bank statements for the lender to review.
• Debt-to-income (DTI) ratio. Lenders are also concerned with your DTI ratio, or how your monthly debts compare with your monthly income. If your DTI is high, you can lower it by paying down debts or increasing your income.
• Collateral. Personal loans are typically unsecured, meaning they don’t require collateral. However, a secured, collateral-backed personal loan might be an option if you can’t qualify for an unsecured loan. Lenders often offer higher loan amounts and lower interest rates on secured loans. Some common collateral types are your car title or a savings account. The risk of a secured loan is that you could lose your asset if you default.

2. Prequalify With Multiple Lenders

A $20,000 personal loan is a significant amount of money, so it’s worth comparing multiple lenders before deciding on a loan. Many lenders let you check your rates online through prequalification. This lets you view loan offers without any impact on your credit score. After providing a few personal details, you’ll get to see what rates you might qualify for.

Note that prequalifying for a loan doesn’t guarantee rates and terms. A lender will still need to review your documentation and run a hard credit inquiry. After you apply, your rates and terms may differ from the ones you saw initially. However, prequalifying can still give you a good sense of what your rates might be and whether or not you’ll qualify for a $20,000 loan.

3. Compare Your Offers

Once you’ve researched rates with multiple lenders, take some time to compare the details of each loan offer. Use a personal loan calculator to estimate your monthly payment and long-term interest charges.

Remember to take monthly payments, interest rates and fees into account. Some common fees include an origination fee, disbursem*nt fee and prepayment penalty. High fees could offset the savings you get from a low interest rate.

Annual percentage rate (APR) measures both interest rate and fees, so it’s a more inclusive rate than the interest rate alone. Focusing on APR, therefore, can help you compare your loan offers on an apples-to-apples basis as you search for the most affordable one.

4. Complete and Submit Your Application

If you want to move forward with a loan offer, complete and submit an application. The application will be more extensive than the prequalification form.

It will ask for your personal details, including your loan amount and purpose. You’ll also need to upload verifying documents, such as pay stubs or W-2s.

Finally, the lender will run a hard credit check, which could temporarily ding your credit score by a few points. As long as you make on-time payments on your loan, your score should recover within a few months.

5. Manage and Repay Your Loan

Once you’ve submitted your application, you’ll wait for approval on your $20,000 personal loan. Some lenders can approve loans in as little as one business day while others take a few days or weeks.

Once your loan is approved, you’ll sign and submit your final loan agreement. Pay close attention to your loan terms, including how long you have to pay the loan back and when your monthly payment is due.

The lender will deposit the loan proceeds into your bank account. Once you have the loan, you can use it to pay for home renovations, debt consolidation or whatever else you need it for.

You’ll likely start making your monthly payment on the loan right away. Consider setting up autopay from your bank account to ensure you don’t miss any payments.

How to Get a $20,000 Loan With Bad Credit

Qualifying for a $20,000 loan with bad credit could be difficult. Lenders typically require good credit to borrow such a large sum.

However, every lender is different, so it’s worth shopping around to see if one is willing to work with you. You might try inquiring at your bank or credit union, which may be more flexible with existing customers.

Some lenders let you apply with a co-signer, whose good credit could make up for your limited credit and help you qualify or get better rates. You might also opt for a secured personal loan over an unsecured one, which may have lower credit requirements. Make sure you don’t fall behind on payments, though, or you risk losing your collateral.

You could also look into peer-to-peer (P2P) loans, which are funded by individual investors rather than financial institutions and tend to have more flexible borrowing criteria. Another option for bad-credit borrowers is payday alternative loans from borrowers, though the borrowing limits are set at $1,000 or $2,000.

If you don’t have an immediate need for a $20,000 personal loan, consider improving your credit before you apply. Paying down debts, making on-time payments on your loans and disputing errors on your credit report can all help. Lowering your credit utilization ratio, or the amount of credit you’re using compared to what’s available to you, can also boost your score.

Improving your credit score before you start the loan shopping process could make it easier to qualify and help you get better rates.

Where to Get a $20,000 Loan

Long-term Costs of a $20,000 Loan

When you borrow a $20,000 personal loan, you’ll end up paying back a larger amount due to interest and fees. Your long-term costs will depend on your interest rate, fees and repayment term. A lower rate and fewer (or no) fees can save you money, which is why comparing with multiple lenders is key.

Opting for a shorter term can also save you money on interest, but it will mean higher monthly payments. On the flip side, a longer repayment term will feel more affordable from month to month but will lead to higher interest charges in the long run. Most lenders offer repayment terms between one and seven years.

Let’s say, for example, that you borrow a $20,000 personal loan with an APR of 10%. This chart compares your monthly payment and long-term interest charges on various loan terms.

Our personal loan calculator can help you estimate your monthly payment and the cost of borrowing. When choosing a loan term, try to strike a balance between getting an affordable monthly payment and keeping interest charges to a minimum.