How to get a $20,000 personal loan

If you need to borrow $20,000 to consolidate debt, complete a home improvement project, pay medical bills or beyond, you can likely take out a personal loan from a bank, credit union or online lender. Depending on your financial situation (i.e. if you have bad credit or no income), your personal loan options may be limited or too expensive to be worth it. 

To determine where you stand, research loan options that are currently available by using an online marketplace such as Credible. Credible can show you loan rates from 4.99% APR in just two minutes without affecting your credit score. All you have to do is enter your desired $20,000 personal loan amount into their free comparison tool.

After crunching the numbers, you'll need to know how to get a $20,000 personal loan. It's quick and easy to apply for a personal loan worth $20,000 — just make sure you know the answers to the following questions in order to save money and time.

How do I qualify for a $20,000 personal loan?

To qualify for a $20,000 personal loan from a bank, credit union or online lender, you'll need to do your homework. Here are some simple steps you should take to boost your chances of approval.

Step 1: Check your credit score and report

Step 2: Get preapproved for a personal loan 

Step 3: Get your paperwork in order

Step 1: Check your credit score and report

Personal loan applicants with a FICO credit score of 670 or higher, you may have a good shot at getting a $20,000 personal loan with a favorable rate and loan term. While it’s possible to get approved with a credit score lower than that, it could get expensive. Many mainstream lenders charge as high as 36 percent. 

If you're confident in your credit score, then you should compare personal loan rates to see what range you qualify for. With Credible's free comparison tool, you can compare multiple lenders and find your rate and loan term by entering some simple personal information (such as your loan amount and estimated credit score).

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You can also run the numbers through Credible’s loan calculators to get a better picture of your monthly payments and how it could impact your personal finance.

You should always aim to have excellent credit, but if your credit score needs some work that's OK. Get a free copy of your credit report to determine which areas you need to address. This may include disputing unexpected or negative items from your credit report.

Step 2: Get preapproved for a personal loan

Many personal loan lenders allow you to get preapproved for a personal loan before you apply. This process requires a soft credit check, which won’t hurt your credit score. The result is a conditional rate offer based on the limited credit information the lender received — you’ll get a final offer after you apply. 

Use Credible to view your prequalified rates within two minutes. It's free to use and there are no hidden fees.

HOW TO PREQUALIFY FOR A PERSONAL LOAN

Getting preapproved for a loan with multiple lenders allows you to compare personal loan rates, loan terms, fees and other features that could affect how much you pay and your loan experience. Try to focus on unsecured loans, which don’t require any collateral to get approved.

Step 3: Get your paperwork in order

During the application process, you may be asked to provide various documents, including:

Photo ID

Proof of income (pay stubs, W2 form, tax returns or bank statements)

Other financial statements

Proof of residence (lease agreement, mortgage statement or utility bill)

Once you have these documents, with the personal loan lender that provides the best loan terms for your situation. Make sure you understand the loan terms before accepting, then create a loan repayment plan.

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Where to get a $20,000 personal loan

Banks or credit unions: If you’re already a customer of a bank or credit union, your relationship may help you qualify for better terms than what you can find elsewhere. Also, note that credit unions legally can’t charge interest rates higher than 18 percent on most personal loans.

Online lenders: Online lenders are often the best place to get a personal loan of this size. See which personal loan lender offers $20,000 personal loans via Credible. You can request rates from Credible's partner lenders by filling out just one form.

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Frequently asked questions

How do I qualify for low-interest rates on personal loans?

The most popular reason to get a personal loan is debt consolidation, but it can be used for everything from unexpected expenses and home improvements to college tuition. Credible can help compare personal loan companies (and hopefully land you the low rate you're looking for). Credible has compiled a list of some of the top personal loan companies that are likely to ensure customer satisfaction, according to their financial experts.

Comparing competitive loan offers and term lengths can be like comparing apples to oranges. You want to look at a few criteria to select the loan that works best for your situation.

1. Interest 

The interest rate will likely be the first consideration when you investigate your options. It’s the amount the lender charges you to take out the loan. Rates can vary greatly, and are often based on your credit score, term lengths, and the amount you are borrowing. 

You’ll also want to consider the APR. This includes the interest plus any fees you may pay to take out the loan, such as an origination fee.

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2. Term lengths

You’ll also want to take a look at the term lengths the lender offers. For personal loans, the term lengths usually range between two and seven years. The longer you take to pay back the loan, the more interest you’ll end up paying. Most lenders offer lower interest rates for shorter loan terms.

3. Monthly payments 

To protect your credit score, you’ll want to research payment options, and the number of your monthly payments can have a direct impact. Your payment will depend on the length of your loan. A longer-term will result in lower monthly payments. It will also result in ultimately paying a higher amount during loan repayment.

4. Total cost 

According to the federal Truth in Lending Act, a bank, credit union and online lender must provide you with the total cost of the personal loan during the application process. This number can help you compare personal loan lenders and offers. It will include the total charge for financing, such as interest and fees. It will also break down the principal and interest for all of your payments over the term.

Loan calculators can be useful tools when determining your financial goals. Use Credible’s loan calculators to estimate your monthly payments to ensure you're choosing the best loan term for you.

How can I get a loan after being denied?

In the case that your application is denied, the lender will likely offer a reason, and this information can be helpful for the future.

If your credit score wasn’t high enough, for example, take steps to improve it by avoiding late payments. Also, check that your credit report doesn’t include incorrect information. According to the Federal Trade Commission, one in five people has an error on their credit report. If you find a mistake, disputing it and getting any misinformation removed can improve your credit score.

Lenders also like borrowers to have a debt utilization ratio of less than 30 percent. This number is the percent of credit you are currently using compared to the total amount available. If you were denied a $20,000 personal loan, you may want to pay down debt to lower your debt utilization ratio.

Finally, you may decide to apply for a smaller loan. Your options for finding lenders will increase, and the requirements may not be as strict.

What personal loan mistakes should I avoid?

Before you sign on the dotted line, carefully read the conditions of the loan. Competitive rates and term lengths vary, so be sure to shop around and know what you’re getting into. And watch out for scams. Check the lender’s reputation as well as customer reviews by visiting the Consumer Financial Protection Bureau and Better Business Bureau websites.

Also, know what you’re getting into by asking about any costs or fees that will be assessed with the personal loan beyond its interest rate. Some lenders charge origination fees, which can range from one to eight percent. Others may charge early loan repayment or late payment fees.

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Large personal loans are possible if you are a qualified borrower. By knowing where to look and what to expect, you increase your chances of being approved and getting the funds you need to meet your personal finance goals. If you're having difficulty choosing a personal loan, consider reaching out to a financial advisor.

Are there any alternatives to personal loans?

You can use a personal loan for just about anything, but another loan type may be a better fit for your needs. For example, some credit cards offer 0% APR promotions on purchases and balance transfers, which can save you money.

Credible can help you find the right credit card for you. Choose zero percent credit cards and get a breakdown of the annual fee, welcome offers, credit needed and more.

If you own a home, a home equity loan or line of credit could save you money on interest —though they also present the danger of losing your home if you can’t repay the debt. And if you’re looking to fund a business, a business loan may provide better terms for your situation.

Also, consider whether you need to borrow money at all. It may be better for your financial health to save up for your expenses.

Stephanie Vozza contributed to this report.