How To Get a $20,000 Personal Loan

There are a few different ways to borrow $20,000, with personal loans and home equity loans being the most common. But each route has its pros, cons, and eligibility requirements. Learn where to get a $20,000 loan, what to consider before borrowing $20,000, the different ways to do so, and what to expect in terms of cost.

$20,000 personal loan lenders

Where to find a $20,000 loan

If you decide you want to move ahead and borrow $20,000, here are some places you can turn.

Personal loan lenders

Personal loans are installment loans that provide you with a lump sum of money, typically within days of applying (some lenders offer same-day personal loans). The loans are repaid, plus interest and fees, over a set term. In most cases, they’re unsecured, but some lenders do offer collateral loans, which involve you pledging an asset to secure the loan. This can improve your chances of qualification or lower your rate.

A wide range of financial institutions offer personal loans, from banks and credit unions to personal finance companies and fintech lenders. While available loan amounts can range from $600 to $250,000 (depending on the lender), $20,000 loans are a fairly common offering. It’s also common for lenders to allow repayment terms up to seven years (but choosing a shorter repayment period could reduce your overall loan costs).

Check Out: Best Personal Loans

Home equity loan lenders

If you’re a homeowner sitting on some equity (more than 20%), another option is to take out a home equity loan or home equity line of credit (HELOC). You can find these from many banks, credit unions, and mortgage companies.

Due to the collateral required, they often have lower interest rates than unsecured loans, and more flexible eligibility requirements. 

However, there are a few downsides. If you default on a home equity loan, your home could go into foreclosure. Home equity-based loans may also have steep closing costs and can take more than a month to close.

Your life insurance company

Do you have a permanent life insurance policy with a cash value component? You may be able to borrow $20,000 from your insurer if your cash value balance is sufficient to secure the loan. 

Life insurance loans can be attractive because they come with competitive interest rates and don’t require a credit check. Your cash value will also remain intact, and you won’t be required to make repayments according to any specific schedule.

But there are a couple of hazards to be aware of. If you don’t make sufficient payments on the loan, the loan’s interest could potentially eat away your cash value and cause your policy to lapse. 

That, in turn, could result in a taxable event. And if you don’t repay the loan before you pass, the outstanding balance will reduce the death benefit your beneficiary receives. Similarly, if you surrender the policy before paying back the loan, your insurer will deduct the outstanding loan balance from the cash value.

Your 401(k) plan provider

Many plan providers offer 401(k) loans in amounts up to 50% of your vested balance or $50,000, whichever is less, with terms of up to five years (though this may be extended if used to purchase a primary residence). For example, f you’ve accumulated a vested balance of at least $40,000 in your 401(k) account, you may be able to take out a $20,000 loan against it. 

Like life insurance loans, 401(k) loans don’t require a credit check. Unlike a life insurance loan, the interest you pay on a 401(k) loan goes back into your account.

But they’re not without risks. If you leave your job before the loan is paid off, the entire amount may come due immediately, and if you default, you could face severe tax consequences. Plus, you could lose out on years of gains in your retirement account, as borrowed funds are not invested.

Compare: 401(k) Loan vs. Personal Loan

How much will a $20,000 loan cost?

The cost of a $20,000 loan will depend on factors like the interest rate, repayment terms, and fees. Here are the main factors that impact your cost on a personal loan:

• Annual percentage rate (APR): The Federal Truth in Lending Act requires lenders to show consumers the annual cost of credit (including interest and upfront fees) expressed as a yearly rate. APRs serve that purpose, making them an ideal way to compare between credit options.
• Fees: A loan’s fees aren’t always split up equally over the life of the loan. Origination fees, for example, are often deducted from your personal loan funds upfront. So, take note of how fees are charged and if they’ll impact your loan balance. You may need to borrow more if a fee is going to reduce the loan amount you receive. Also take note of other fees, like late or returned payment penalties.
• Repayment term: The repayment term is the number of months or years you’re given to repay the loan amount. Since the interest rate applies as long as you’re repaying the loan, longer terms generally result in higher costs.

With an understanding of the main factors that influence the costs of a $20,000 personal loan, let’s look at how the cost can vary for borrowers with different credit profiles.

Personal loan cost comparison

A loan's APR is such a big deal because it can mean the difference between thousands of extra dollars spent or saved to borrow the same amount of money. Below, we compare costs between three $20,000 personal loans, each with five-year repayment terms, but different APRs. 

Top loan purposes for $20,000 loans

According to data from the Credible personal loan marketplace, people who borrowed $20,000 used it for purposes including:

Interest rates for $20,000 loans by loan purpose and credit score

If you know where your credit score falls in the FICO score range (excellent, very good, good, fair, or poor), you can estimate the rate you might be approved for on a $20,000 loan by looking at average rates received by real borrowers — based on 12 months of Credible personal loan marketplace data.

$20,000 approval estimates by credit score

Your credit score impacts how likely you are to be approved for a loan and the rate you're likely to get. The chart below shows approval estimates for $20,000 loans by credit score, along with average interest rates and average borrower incomes, based on 12 months of Credible loans data.

What to consider before taking out a $20,000 loan

Before you take out a $20,000 loan, it’s important to review your budget. Look over your current income as well as your expenses to figure out the maximum monthly payment amount you can afford.

When setting on an amount, be sure to consider any income fluctuations you tend to experience. You want to be able to comfortably afford the payment in your best and worst months. The payments will also likely extend for several years to come, so consider the stability of your income source in the future. Is it reliable and long-term, or is there a chance it’ll be interrupted?

Another consideration is if the cost is worth it. A $20,000 loan could cost you thousands of dollars in interest and fees. Consider how you plan to spend the money and if it will offer returns that justify those costs.

Personal loan calculator

If you decide to take out a personal loan, use a personal loan calculator to determine interest charges over time.

How to apply for a $20,000 loan

The way you apply for a $20,000 loan is going to depend on the type of loan you’re seeking. You’ll have to contact the lender to find out its specific process. However, here’s how it typically works for personal loans:

1. Check your credit: Before you do anything else, review your credit reports and scores. You can check your credit score for free using Credible's credit monitoring tool and your credit reports at AnnualCreditReport.com. Your eligibility is going to depend heavily on them, so you want to make sure they’re in the best possible shape. Correct any errors on your credit report and look for quick improvement opportunities, like paying down a credit card balance or using Experian Boost.
2. Shop around: With so many lenders on the market, it pays to shop around and prequalify with multiple lenders. Focus on ones that offer the loan type, amount, and terms you’re looking for — and have eligibility requirements you can meet — to help narrow your options.
3. Compare quotes: Compare prequalification quotes side by side and look for the one that offers the best overall value for your needs.
4. Apply with the best lender: Once you find the best fit, move forward with the full application process for that lender. You’ll often need to allow a hard credit inquiry and provide proof of your identity, residence, income, and employment. Soon after, the lender will provide you with its decision. If you accept the loan offer, you could receive your funds as soon as the same business day, or within a few business days, depending on the lender.