How to get a $20,000 personal loan

1. Check your credit score and eligibility

Before applying for any personal loan, it’s a good idea to check your credit score and review your credit report. Most lenders use your credit score to automatically approve (or decline) your personal loan — so it’s important to know where you stand before submitting an application.

In general, getting a $20,000 personal loan with a low interest rate and favorable terms requires a “very good” to “excellent” credit score. This means you’ll likely need a credit score of at least 740 to get affordable personal loan rates.

Some lenders don’t require a high credit score, but you may end up paying more in the long run if your credit is poor. For example, if a lender has a minimum credit score requirement of 580 to qualify for a personal loan, you may end up with an annual percentage rate (APR) as high as 35%.

How to improve your credit score

If you find that your credit score is too low to qualify for a personal loan with reasonable rates, you can take steps to get your score up.

A few ways to improve your score include:

• Make on-time payments: The biggest impact on your credit score is making on-time payments to your existing creditors. On the other hand, late payments on your mortgage, credit cards or utility bills can tank your credit. If you do have late or missed payments, make sure to contact your servicer and catch up on payments to boost your score.
• Pay down debts: Too much existing debt can hurt your credit score. Paying off lines of credit (like credit cards or a HELOC) can lower your credit utilization and increase your score.
• Don’t close old credit cards: Part of your credit score is determined by your credit history, which measures the average age of all your credit accounts. If you have an old credit card that’s still in good standing, don’t close it. Keep older credit lines open to improve your credit score over time.
• Don’t open any other credit lines: If you’re applying for a new personal loan, you might risk your chances of getting approved if you have other recently opened credit lines (e.g., a new credit card or auto loan). Wait until after your loan is approved to consider applying for any new credit.

2. Compare lenders for the best rates

If you want to get the best rates and lowest monthly payment on a $20,000 personal loan, you’ll want to compare several lenders. While most online lenders offer competitive rates, some have lower APRs and better payment terms than others. Here’s what to look for:

• Loan amounts: Not all lenders offer $20,000 loans. Make sure to find lenders that will let you borrow as much as you need.
• Interest rates: Your interest rate impacts your credit score and your overall monthly payment on your loan. It’s important to compare lenders to find the best rates on a $20,000 personal loan.
• Type of lenders: While online lenders typically offer the best rates on personal loans, it’s also a good idea to check with local banks or credit unions. Sometimes they have promotions for lower rates, lower fees or better chances of approval.
• Multiple payment terms: If you prefer flexibility, it’s important to compare lenders with multiple options for repayment terms. More payment options means you can control your monthly payment amount to work with your budget.
• Rate discounts: Some lenders offer rate discounts for certain borrowers, which can help you save money. Look for lenders that offer auto-pay discounts and other ways to save money on your rate.
• Prequalification: When comparing lenders, it’s best to get prequalified using the free online applications through each lender. This lets you quickly see the rates and loan amounts you’re approved for — and it doesn’t hurt your credit score at all.

Narrow down the best lenders to get a $20,000 loan from, and pick the one that works with your budget.

3. Gather necessary documentation

Once you pick a lender, you’ll need to fill out an application. This includes submitting personal and financial information, as well as proof of income and a photo ID.

Here’s a list of documents you’ll want on hand when applying for a personal loan:

• Proof of income (W-2 or recent pay stub)
• Proof of identification (driver’s license or U.S. passport)
• Proof of address (utility bill)
• Bank statements
• List of debt balances

As part of the application process, your lender may ask for some (or all) of these documents, so it’s a good idea to have access to them. Most lenders have an online portal that allows you to scan and upload these documents.

4. Understand loan terms and monthly payments

If you’re getting a $20,000 personal loan, it’s important you understand the exact loan terms and monthly payment options to ensure you can afford it. Most personal loans offer multiple repayment terms.

In general, the shorter the repayment term, the higher your monthly payment will be. The most flexible lenders tend to offer repayment terms from 12 months to 84 months. Just know that while longer loan terms have lower payments, you’ll end up paying more in interest in the long run.

For example, if you get a $20,000 personal loan at a 9% APR with a 60-month repayment term, your monthly payment may be around $415. But if you choose a shorter 24-month loan term, your payment jumps to $913.

Your interest rate also affects your monthly payment. Using the same $20,000 loan example with a 60-month repayment term, if your loan has a 7% APR, your monthly payment would be only $396. But if you have a lower credit score and can only secure a loan with a 14% interest rate, your payment jumps to $465 — even with the same 60-month repayment.

5. Apply for the loan

Once you’re ready to apply, you’ll submit your application online for most lenders. This process can usually be completed in about 15 minutes and requires submitting the following:

• Full legal name
• Birth date
• Address
• Social Security number
• Income estimate
• Debt monthly payments
• Whether you own or rent a home

You may also need to submit the documents you’ve gathered, including proof of income and bank statements.

Once you complete and submit your application, you may get instant approval, but you may have to wait for a review. Sometimes lenders will ask for more information at this point.

Once approved, you’ll be asked to input your bank account details to receive the funding. Most lenders use ACH deposits and can send the money as soon as the next business day.