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What to Consider When Getting a $20,000 Personal Loan

Getting a $20,000 Personal Loan - What to Know
Lauren Ward
Lauren WardUpdated July 3, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you have a large upcoming expense, such as a big move, home renovation, or major medical cost, you may find yourself in need of more cash than you currently have sitting in the bank. The good news is that you may be able to get a personal loan for as much as $20,000. The interest you’ll pay on that loan, and how long you’ll have to pay it back, will depend on the lender, as well as your qualifications as a borrower.Read on to learn when you might consider taking out a large personal loan, how to qualify for a $20,000 personal loan, and what monthly payments on a $20,000 personal loan may look like.

Reasons to Consider a $20,000 Loan

The way personal loans work is that you borrow a lump sum of money that can then be used for almost any purpose. Here are some reasons why someone might consider taking out a personal loan for $20,000. 
  1. Home improvement If you have costly home repairs that can no longer be ignored, or you’re planning a small remodel, you can use a personal loan for home improvement. Typically, this is a better option than using your credit card because interest rates are usually lower. 
  2. Emergency funds If you suddenly get hit with high medical or funeral bills that would eat up all your savings, you can get a personal loan for emergencies. This can help you manage the costs while enabling you to keep some of your cash in reserve.
  3. Consolidating debt Instead of paying down multiple forms of debt with a variety of interest rates, you might want to roll all of your debts into one loan. Doing this can potentially lower your interest rate and/or monthly payment. It also reduces the number of bills you have to pay every month.
  4. Wedding costs Some young couples will charge wedding expenses on their credit cards, but this typically isn’t the best financing option. Credit card interest rates are usually much higher than personal loan interest rates. 
  5. Moving costs Whether it’s across the country or just across town, moving can be a costly endeavor. You can use a large personal loan to cover the costs of moving supplies, real estate commission/fees, renting a truck, hiring a moving company, and/or purchasing items and furniture you need to set up your place. 
  6. Vacation costs If you want to take your family on an unforgettable trip but don’t have the funds, a personal loan could make your traveling dreams a reality — assuming you can comfortably afford the monthly loan payments. 
  7. New appliances One new high-end appliance can run over $1,000. If you need to replace a number of major appliances, and possibly also update the electrical system in your home, a personal loan of $20,000 could be useful.

Typical $20,000 Loan Terms

Personal loans for $20,000 are available through banks, credit unions, and online lenders. Here’s what you need to know about rates and terms.

Average Interest Rates

Personal loan interest rates currently run anywhere from 4% to 36%. The rate you’ll actually pay on a $20,000 personal loan will depend on the following factors.
  • Credit score
  • Debt-to-income
  • Income
  • Credit history
  • Collateral (if choosing a secured loan)
  • Type of interest – fixed or variable
  • Lender
To find the best deal, it’s a good idea to shop around and compare personal loan rates from multiple lenders. Many lenders allow you to get prequalified with just a soft credit check, which won’t hurt your credit. While the prequalified rate is not a guarantee, doing this with multiple lenders can give you a good sense of what interest rate you’ll pay for a $20,000 personal loan.

Typical Repayment Terms

Most lenders offering $20,000 personal loans will offer repayment periods between three and five years. Shorter repayment periods typically come with higher monthly payments but less total interest. For longer repayment periods, the opposite is true. Going with a five-year loan term can make your monthly payments more manageable, but you’ll pay more in interest overall for the loan. 

Typical Credit Score Requirements

Personal loan rates are, in large part, determined by your credit score. The chart below shows the average interest rate for a personal loan based on your credit score (as of April 2022).
Credit ScoreAverage Personal Loan Interest Rate
Excellent (720-850)10.3%-12.5%
Good (690-719)13.5%-15.5%
Fair (630-689)17.8%-19.9%

$20,000 Personal Loan Monthly Payments

The monthly payment for a $20,000 personal loan largely revolves around two factors:
  • Repayment term This is how long you will have to repay the loan. It’s usually a good idea to go with the shortest term you can afford to keep your interest costs as low as possible. Example One: A five-year repayment term with a 15% annual percentage rate (APR) would make the monthly payments $476. The total amount of interest paid would be $8,547.92. Example Two: A three-year repayment term with a 15% APR would make the monthly payments $693. The total amount of interest paid would be $4,959.04. Thus, the three-year term will cost $3,588.88 less than the five-year term. 
  • Interest rate Your interest rate will determine how much money the bank makes on your loan. Just remember that an origination fee (sometimes called an administration fee) may be added to your interest rate. Therefore, to calculate the true total cost of the loan, you’ll need to know its APR, which includes both the interest rate and any fees. Looking at APRs for personal loans also allows you to compare rates apples-to-apples.
Once you know a loan’s APR and the term of the loan, you can use an online loan calculator to figure out what your monthly payments will be. If the payments are more than you can afford, you might try plugging in a lower loan amount. Smaller loans, such as a $2,000 personal loan, will come with a lower monthly payment.

Qualifying Criteria for a $20,000 Loan

To qualify for a $20,000 loan, you will typically need:
  • A strong credit score For an easy loan application process, you will want a credit score that is considered “good” (690-719). You can find personal loans for bad credit on the market, but interest rates will typically be higher. If your score is currently fair or poor, you can take steps to improve your credit score. However, it will take some time to see results. 
  • A steady source of income For each loan amount, lenders have minimum income requirements. This is to make sure you won’t have difficulty coming up with your monthly loan payments. You will need to verify your income with pay stubs, tax returns, and bank statements. 
  • Collateral This is an asset (such as cash, stocks, a car, or a home) that you put up for the loan. If you become unable to repay the loan in full, the lender can seize that asset in order to recoup its losses. You will only need collateral if you take out a secured loan. Since there’s less risk involved for the lender, collateralized personal loans typically come with lower interest rates than unsecured loans.  
  • Low debt-to-income (DTI) ratio: Your DTI ratio is the percentage of your gross (pre-tax) monthly income that is used to pay your total monthly debts. The highest DTI most lenders typically like to see is 43%. To calculate your DTI, add up your monthly debts from loans, mortgages, and credit cards and divide that amount by your gross monthly income.

Top $20,000 Personal Loan Lenders

We chose our top $20,000 personal loan lenders based on a Google search of “best personal loan lenders” in June 2022.
LenderLoan TermAPR RangesLoan Amounts
LightStream2 - 7 yrs3.49% - 19.99%Up to $100,000
Best Egg3, 5 years4.99% - 35.99%Up to $50,000
SoFi2 - 7 years4.74% - 19.28%Up to $100,000
Upgrade3, 5 yrs5.94% - 35.97%Up to $50,000

View Personal Loan Rates

If you’re interested in taking out a $20,000 personal loan, keep in mind that rates and terms can vary significantly from one lender to another. To get the best possible deal, you’ll want to shop around and compare offers from several different lenders. You can do this by prequalifying on a lender’s website. If you’d rather not jump around the web and fill out multiple applications, Lantern by SoFi can help. With our online lending platform, you can instantly access multiple personal loan offers with just one short application. There’s no commitment and it won’t affect your credit score*.
Photo credit: iStock/ Povozniuk
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About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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