By Austin Kilham ·February 22, 2023 · 6 minute read
We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.Read moreWe develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.Read less
You’ll likely need a credit score in the Good range (670 to 739) or higher to qualify for a $20,000 personal loan with a competitive interest rate. If your credit rating is Poor or even on the lower end of Fair, you may have difficulty getting approved for a personal loan.
Personal loans offer relatively low interest rates compared with other options, such as high-interest credit cards. Ultimately, the interest rate will depend on the size of your loan, the term, and your credit score.
Here’s a closer look at what it takes to apply for a personal loan this year.
Can I Get a $20,000 Personal Loan with Bad Credit?
Your credit score helps banks understand your history of managing debt. A high score suggests that you have a history of paying your bills on time while managing multiple accounts. As a result, banks see borrowers with high scores as at relatively low risk of default. Therefore, they may offer these borrowers better terms and interest rates on loans.
Lenders see borrowers with low scores as risky. To compensate for this risk, they may charge higher interest rates, if they offer a loan at all. It may be more difficult for those with bad credit to find a $20,000 personal loan, or to find one they can afford.
What Is the Typical Credit Score Required for a $20,000 Personal Loan?
When applying for a loan, a FICO® credit score in the Good range (670 to 739) or higher will help you qualify for loans with better interest rates from a wider variety of lenders.
If you have Poor credit (a FICO score of 300 to 579), or even in the low end of the Fair range (580 to 669), you may have difficulty getting approved for a personal loan.
If this is the case, all is not lost. You can work to raise your credit score by paying down debts and making sure to always make payments on time.
What Can You Use a $20,000 Personal Loan for?
A personal loan is money that you borrow from a bank, credit union, or online lender that you pay back in regular installments with interest, usually over about two to seven years. One feature of personal loans is the flexibility it provides borrowers in how they can spend their funds. Here are a few common options:
Debt Consolidation
Debt consolidation is one of the most popular uses for personal loans. If your current debt carries high interest rates, you may be able to pay it off in one fell swoop, combining all of your debt under a lower interest rate. Consolidating confers a number of advantages, including saving money in interest and replacing several debts with just one payment, which may be easier to keep track of and pay off on time.
If you consolidate credit cards, be wary of running up more debt on your cards while you pay off your personal loans. You don’t want to increase the amount of debt you’ve taken on.
Medical Expenses
If you’ve had an accident or unexpected illness, and you find yourself with growing medical bills, you may consider a personal loan to help you get them under control. Medical bills can be extremely pricey, so before committing to a loan, see if there is a way to negotiate the price down.
You may also be able to negotiate a payment plan that allows you to pay off your bill in installments, which might be more manageable and wouldn’t require taking out a loan that saddles you with interest payments.
Home Improvements
Borrowing money for home improvements is sometimes necessary and smart. For example, repairing a leaking roof in a timely manner can help prevent further damage to your home, which could cause pricier repairs down the road. In some cases, improvements or remodels can increase the value of your home.
That said, beware of taking out loans for home improvements that are simply “wants.” For example, it may not be prudent to borrow money to install a hot tub.
Funeral Expenses
In 2021, the median cost of a funeral was approximately $7,848, according to the National Funeral Directors Association. Personal loans may be an option for those who can’t afford to pay these expenses out-of-pocket.
Vacation Expenses
You can use a personal loan to pay for anything, but should you? The answer is likely no. When it comes to discretionary spending, like vacations, consider saving up money from your paycheck to cover the cost. Otherwise, because you’re paying interest, your vacation could end up costing you a lot more than the sticker price.
What’s more, if you miss a payment, you’ll be putting your credit score in jeopardy, which may not be worth it for a few days of fun in the sun.
Recommended: 11 Types of Personal Loans
Applying for a $20,000 Personal Loan
To secure your money, you’ll need to get approved for a personal loan. Once you know how much you want to borrow, you may consider getting prequalified for a loan. Lenders will ask you to provide basic information, including your address, income, and Social Security number. They may then perform a soft credit check that won’t hurt your credit score.
Finally, they’ll offer you a prequalified quote, including how much money you qualify to borrow, your monthly payment, and your interest rate. You can use this process to shop around with a few lenders to secure the best quote.
Once you’ve decided which lender to go with, you’ll submit an application. You’ll need to provide proof of income, address, and employment, and you’ll need to submit to a hard credit check.
Recommended: Personal Loan Calculator
Applying for Other Small Loan Amounts
If you don’t qualify for a $20,000 personal loan that you can afford based on your credit, you might consider taking out a smaller loan, such as a $3,000, $5,000, $10,000, or $15,000 personal loan. Smaller loans present less risk to lenders, so you may be able to qualify with a lower score.
The Takeaway
To get the best terms and interest rate for a $20,000 personal loan, you’ll likely need a Good credit score (670 to 739). But no matter your score, shop around and consider using prequalification to find the loan that’s best for you.
Consider personal loans from SoFi, which have no fees and offer low rates for loans of $5,000 to $100,000. Borrowers can receive funds as quickly as the same day their loan is approved.
FAQ
What credit score is needed for a $20,000 personal loan?
To access personal loans from a broad array of lenders offering the best interest rates, you’ll need a credit score of at least 670.
Where can I get a $20,000 loan with bad credit?
Some lenders may offer you a personal loan if you have bad credit. However, they may charge much higher interest rates.
What’s the monthly payment on a $20,000 personal loan?
Your monthly payment will depend on the term you choose and your interest rate. Typically, shorter terms will carry higher monthly payments and lower interest rates, while longer terms will have smaller monthly payments and higher interest rates.
Photo credit: iStock/AsiaVision
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
SOPL0322016
As an expert in personal finance and lending, I am well-versed in the intricate details of acquiring and managing personal loans. The article you provided, dated February 22, 2023, authored by Austin Kilham, delves into various aspects of personal loans, particularly focusing on obtaining a $20,000 personal loan and the associated considerations.
The piece starts by emphasizing the role of credit scores in loan approvals. It rightly asserts that a good credit score, typically ranging from 670 to 739, enhances the likelihood of qualifying for a $20,000 personal loan with competitive interest rates. The article reinforces the importance of credit history, explaining that higher credit scores depict responsible debt management and, consequently, lower risk for lenders.
Furthermore, it provides valuable insights into the purposes of a $20,000 personal loan, ranging from debt consolidation to covering medical expenses, home improvements, funeral costs, and even cautioning against using loans for discretionary spending like vacations.
The article also guides readers through the loan application process. It suggests that individuals should be proactive in raising their credit scores by paying off debts and ensuring timely payments. The importance of prequalification is highlighted as a tool for understanding loan terms without negatively impacting one's credit score.
In addition, the article suggests alternatives for those who might not qualify for a $20,000 loan based on their credit score. It recommends exploring smaller loan amounts, such as $3,000, $5,000, $10,000, or $15,000, which may have more lenient eligibility criteria.
Towards the end, the article mentions SoFi as a lender, providing additional information about their loan products, including no fees and low rates for loans ranging from $5,000 to $100,000. It emphasizes the importance of shopping around for the best loan terms and suggests considering SoFi Personal Loans for their favorable terms.
Finally, the FAQ section addresses common queries, such as the minimum credit score required for a $20,000 personal loan, where to obtain a loan with bad credit, and the factors influencing monthly payments.
In summary, the article serves as a comprehensive guide for individuals seeking a $20,000 personal loan, covering topics from credit score requirements to loan purposes and the application process. It demonstrates a deep understanding of the intricacies involved in personal finance and loan management.
