How To Get a $40,000 Loan

Some options, like credit cards or borrowing from a family member, may not be realistic when you need to borrow as much as $40,000. A $40,000 personal loan can be the best option for larger expenses, like medical bills or home repairs, with some lenders offering loans up to $50,000 or more. 

Where to get a $40,000 personal loan

You can get a $40,000 personal loan through many online lenders, banks, and credit unions.

Online lenders

Online lenders don't have physical locations like banks and credit unions, instead offering personal loans online through their websites. They often use AI underwriting, which can speed up approval decisions and give lenders access to additional information like rental and utilities payments to gauge your ability to pay back a loan. As a result, borrowers with limited or bad credit histories could qualify for a loan through some online lenders.

You can prequalify for a loan with most online lenders to view estimated rates and terms before applying. Prequalification doesn't affect your credit but it’s not a guarantee that you’ll be approved or get the prequalified rate. Applying for a loan usually involves a hard credit check which can cause your score to dip temporarily.

Credit unions

You often need to be a member to apply for a credit union loan, which may require a minimum deposit or that you meet specific eligibility criteria, like being employed with an affiliated company or living in a certain area.

Credit unions are member-owned, so they operate in the best interest of their members, usually resulting in competitive interest rates and terms for personal loans. The average rate for a three-year loan from a credit union was 10.75% as of March 2025, compared to an average bank loan rate of 12.03%, according to data from the National Credit Union Administration.

Generally, credit unions are also more flexible with credit requirements than banks, so they can be a good option for borrowers with fair credit.

Banks

Many banks that offer personal loans have physical locations you can visit if you prefer in-person guidance, although large banking organizations often accept online applications, too. If you have an account with a particular bank, you might be eligible for loan perks, like an interest rate discount, longer repayment terms, larger loan amounts, or same-day funding.

“As for underwriting, banks tend to take a more comprehensive approach than credit unions or fintech lenders,” says Christopher Naghibi, executive vice president and chief operating officer at First Foundation Bank. “That’s a polite way of saying they’ll look under the hood.”

While the human underwriting process can take extra time, Naghibi says that it could allow you to explain your financial history. Some banks may accept a letter or discussion that details any credit or income concerns. “The more context, the better,” adds Naghibi.

Tips on comparing $40K personal loans

Research lenders and prequalified personal loan offers to decide which $40,000 personal loan is the best option. Here are the most important factors to consider:

1. Interest rates

An interest rate on a personal loan expresses how much you’ll be charged annually on the unpaid principal amount. However, lenders typically advertise the loan’s annual percentage rate, or APR, which is a more accurate way to look at cost. The APR accounts for the interest rate and any upfront fees. 

To get the lowest available APR, you should have excellent credit and an income that’s more than sufficient to make loan payments. You should also choose a short repayment term, as lenders tend to charge higher rates for longer terms. 

2. Fees

Fees include upfront fees, often called origination fees, as well as late fees, insufficient funds fees, and other fees. Some lenders make their fees clearer on their websites than others, so you may need to review the terms and conditions, fine print, or read FAQ pages to understand which fees could increase the cost of your loan.

Let’s take a closer look at fees:

• Origination fee: An origination fee is an upfront charge that some lenders use to cover loan administration costs or offset risk. Lenders charge it as a percentage of your loan, usually between 1% and 10%, but it can be as high as 12%. This fee often comes out of your loan funds, so you'll receive less than the amount you borrow.
• Late fee: A late fee is usually a flat fee charged to your account if you miss your payment due date. 
• Prepayment penalty: While rare for personal loans, some lenders might charge a fee for paying off your loan early. 

Late fees are unavoidable, but an origination fee reduces the money you receive and increases the APR. Try to prequalify for a no-origination fee loan before proceeding with one that charges an upfront fee.

3. Repayment terms

The repayment term is the length of time you have to pay off your loan in full. Typical $40,000 personal loan terms range from one to seven years. But shortening your term can save you a lot of money on interest.

While you might want to take longer to pay off a $40,000 loan, know that your lender may charge a higher APR as a trade-off. Average APRs for 3- and 5-year personal loans were 12.99% and 19.72%, respectively, according to Credible data in May 2025. 

However, Bryan Kuderna, a certified financial planner and the founder of Kuderna Financial Team, doesn't always recommend a shorter loan term for his clients, as it can significantly increase monthly payments. “If a client has poor liquidity (anything less than six months' expenses as an 'emergency fund'), then a longer repayment term may be favorable,” says Kuderna. “I know it's not fun to pay interest longer than we absolutely have to, but if it's at the risk of being paycheck to paycheck without a buffer in savings, then it's very likely the client will end up right back in debt.”

4. Monthly payment

Lenders split your loan into monthly payments that you'll pay in equal installments over the length of your loan term. Personal loans usually have a fixed interest rate, which keeps your payments the same every month. 

The amount you'll pay each month for a $40,000 loan depends on your APR and repayment term. For example, a three-year loan with a 14% interest rate would have a monthly payment of $1,367, while a five-year loan with an 18% rate would lower your payment by over $300 to $1,016.

5. Total repayment costs

Look at your total repayment costs — the entire amount you'll pay to borrow a loan — when comparing offers to see how interest and fees can add up over time. Using a personal loan calculator can help. For example, even though the three-year loan above has a higher monthly payment, its total interest cost would be $9,216. However, the five-year loan would cost $20,944 in interest, more than double the amount of the shorter-term, lower-rate loan.

However, your monthly payment and APR are important, but they shouldn't be the only considerations when comparing a $40k personal loan. Naghibi warns that “two offers with the same APR can have wildly different long-term costs, depending on the fees, structure, and prepayment penalties (if applicable).” Read the fine print of a loan offer carefully to make sure you're committing to something that's a good financial decision.

Cost to repay a $40,000 loan

The cost to repay a $40,000 personal loan ultimately depends on your loan's APR and repayment term. Keep in mind that shorter repayment terms may help you access lower rates. 

Here's a look at three hypothetical $40,000 loan structures to give you an idea of your total repayment costs:

Five-year loan cost comparison

The graph and chart below illustrate how different APRs can affect how much you'll pay over the life of the loan. 

Here are a few other common loan terms and their associated costs:

Three-year loan

Seven-year loan

How to get a $40K personal loan

Are you interested in applying for a $40,000 personal loan? Follow these steps.

1. Review your credit profile: Use Credible's free credit score tool to get your score and identify lenders who may work with your score. Also, order a free credit report from AnnualCreditReport.com to spot and fix any errors that could hurt your chances of approval.
2. Research and compare lenders: Look at rates, terms, fees, and funding times across several lenders. Also, research borrower reviews to get a feel for a lender's reputation. 
3. Prequalify: Compare multiple lenders by prequalifying so you can decide which lender is most likely to offer the best rates and terms for your credit profile. Use a personal loan marketplace like Credible to prequalify with and compare several lenders at once.
4. Estimate monthly payments: Use a personal loan calculator to learn what you can expect to pay for a $40,000 loan each month based on the rates you prequalified for. Make sure it fits your budget.
5. Choose a lender and apply: Select a lender that offers the best loan for your needs. Complete the application and submit all required documents for your lender to review.
6. Review loan terms and sign: Upon approval, you'll receive a loan agreement from your lender. Read it thoroughly, paying attention to your repayment schedule, the interest rate, and any fees and penalties. Sign only if you agree to all terms.
7. Begin repayment: Once the lender receives your signed agreement, it will process and fund your loan. Funding times vary by lender, but you can often expect payment within a few business days if using a bank transfer. 

Alternatives to a $40,000 loan

If a $40,000 personal loan doesn't meet your budget or needs, these alternatives could offer fewer borrowing hurdles and lower costs. 

Open a personal line of credit

With a personal line of credit, you can borrow as little or as much as you need, up to your credit limit, similar to a credit card. You'll only pay interest on the amount you borrow. As you pay back what you've borrowed, you regain available credit to borrow against.

Personal lines of credit usually have lower interest rates than credit cards, depending on your credit profile. However, they may come with variable interest rates that rise over time. Also, you may need to be a member of a credit union or a current customer of a bank to get a line of credit or access higher credit limits. 

Borrow against your home equity

A home equity loan or home equity line of credit (HELOC) lets you borrow money from the equity you've built in your home. A home equity loan functions more like a personal loan with fixed monthly payments spread over time. A HELOC, on the other hand, functions like a personal line of credit.

You'll need to secure either option with your home, which lowers interest rates considerably compared to an unsecured personal loan. But the downside is the risk involved: if you can't repay, you could lose your home.

Opt for a peer-to-peer loan

A peer-to-peer lending platform connects borrowers with investors who fund their loans. You apply for a loan through the platform, which evaluates your risk and sends your information to potential investors if approved. Once funded, you'll repay the loan over time with interest, just like a traditional personal loan.

Many P2P platforms offer loans of up to $50,000. The application process can be simpler than applying with a bank or credit union, but, depending on your credit profile, APRs might be higher than what you'd find with traditional lenders.

Get a 401(k) loan

If you have a 401(k) plan, you might be eligible for a loan against your retirement savings. There's no credit check, so it could be a good option if you're having trouble qualifying for a personal loan due to your credit history. The application process is usually relatively quick, too.

Note that not all employers or plan administrators allow 401(k) loans. If yours does, weigh the pros and cons of borrowing carefully. Whatever you borrow won't gain investment returns, which could set your plans for retirement back years. Also, if you leave your job before paying off the loan, the balance could become due immediately. If unpaid, the remaining balance could be treated as a distribution subject to income taxes and penalties.