How to Get a $20,000 Personal Loan
If you need to borrow a sizable amount of money – such as $20,000 or more – a personal loan may be your best option. Personal loans allow you to borrow money for just about any purpose, and perhaps borrow more than you could with a credit card. Plus, the interest rates are fixed, and often much lower than credit cards, payday loans and other expensive forms of financing – especially if you have good credit.
So if you’re in need of a $20,000 personal loan, try following these steps to get approved for the full amount.
1. Check Your Credit Score.
Your first step when attempting to get a personal loan should be to check your credit score.
Lenders take into account your credit history and credit score to decide whether you are a good candidate for a loan.
Credit score requirements vary by lender, but generally, you need a score of at least 640 to get approved. However, when applying for a larger amount of $20,000 and up, you may need a higher score. A score of around 670 or more will increase your chances of being approved for a larger loan amount at the lowest rates available.
If your credit score is not high enough, consider taking some time to improve it before applying for the loan. Many banks and credit card issuers allow customers to see their FICO scores for free, either on their statements or via their online banking portal.
2. Evaluate Your Borrowing Needs.
It’s also important to consider whether $20,000 is the right amount to borrow for your financing needs. Borrowing too much means making higher payments and spending more on interest than necessary. On the other hand, borrowing too little could leave you looking for additional financing.
Once you confirm the amount you need, be sure that the potential payments will fit your budget, says Todd Nelson, senior vice president of strategic partnerships at LightStream. For example, a $20,000 loan with a 10% annual percentage rate, or APR, and five-year repayment term would cost you about $425 a month. You would also pay $5,497 in interest over the life of the loan.
If you altered the terms of the loan to 12% APR and a three-year repayment term, your monthly payments would jump to about $664, but you’d pay a total of $3,914 in interest.
As you can see, it’s important to play around with the numbers and decide what loan terms work best for your financial situation and goals.
“If the lender you’re researching has a loan calculator, be sure to check out the variables that impact your costs,” Nelson says. “For example, choosing a shorter repayment term can often save money in the long run.”
3. Shop Around For the Best Deal.
After you get an idea of what type loan you’re looking for, you can begin comparing quotes from banks, credit unions and online lenders.
“Prior to applying for any loan, an individual should compare various lenders’ available interest rates, terms and fees, if applicable,” says Brian Samelko, vice president of personal lending at PNC Bank.
Each lender will offer different interest rates and terms, so it’s important to get several quotes before making a decision. Most financial institutions allow you to get a quote online without impacting your credit score. You submit a few personal details, and the lender performs a soft credit check to give you an idea of what terms you’d qualify for. Keep in mind that the interest rate, loan amount, repayment period and other terms could change once you submit an official application and the lender performs a hard pull on your credit and goes through the underwriting process.
Also, make sure the lenders you’re considering allow you to pay down your balance early with no penalty, Nelson says. “This is particularly important in today’s economy,” he explains. “If you don’t use the entire $20,000 you’ve borrowed – or find that other funds have become available through sources like student loan forgiveness, a work bonus or tax refund – you can apply those additional dollars to pay down your loan at no additional cost.”
