Best $20,000 personal loans and top alternatives
Key takeaways
- You can borrow a $20,000 personal loan through most banks, credit unions and online lenders.
- Assess your needs and only borrow what you can afford to repay to avoid damaging your credit and overall financial health.
- Home equity loans, credit cards and HELOCs could be viable alternatives to a personal loan if you struggle to qualify.
You can use a $20,000 personal loan to cover almost any large expense, such as a home improvement project, wedding or medical bill. But before you borrow such a significant amount of money, you should know if it’s the right move for you. Determine what you need to qualify, where to find a $20,000 loan and how to estimate your total borrowing costs before you apply.
Best $20,000 personal loans
| APR range | Loan amount range | Minimum credit score requirement | |
|---|---|---|---|
| LightStream | 6.94%-25.29%* with AutoPay | $5,000–$100,000 | 695 |
| SoFi | 8.99%-29.49%* with Autopay | $5,000–$100,000 | No requirement |
| Discover | 7.99%-25.29% | $2,500–$40,000 | 660 |
| Upgrade | 9.99%-35.99% | $1,000–$50,000 | 580 |
LightStream
Bankrate's view
LightStream is an online lender that offers personal loans for people with excellent credit. It stands out for its high loan limit of $100,000 — so you can get a $20,000 personal loan or more — and its flexible repayment terms. LightStream also offers a no-fee policy and a Rate Beat program to help reduce your interest rate to 0.10 percent below a rate you qualified for with another lender.
Pros
- Rate Beat program
- No fees
- Fast approval and funding
Cons
- No prequalification option
- Requires a long credit history
- High minimum loan amount
SoFi
Bankrate's view
SoFi is another online lender with large loan amounts — up to $100,000. You can apply for and manage your loan completely online. Plus SoFi has a unique feature that allows you to opt in to an origination fee for a reduction of your overall APR. This provides flexibility to its borrowers by allowing you to choose a one-time fee in exchange for less interest over the life of the loan.
Pros
- Allows co-borrowers
- Optional fees and autopay discount
- Wide range of loan amounts
Cons
- Must have at least good credit to qualify
- No co-signer option
- High minimum loan amount
Discover
Bankrate's view
Discover offers borrowers some of the lowest personal loan rates on the market. Like TD Bank and LightStream, Discover also offers borrowers no origination fees on its personal loans. However, it may not work for all borrowers. Discover’s shortest repayment term is 36 months, and it requires borrowers to have an annual income of at least $25,000.
Pros
- Low rates
- Long repayment terms
- No origination fees
Cons
- Must have good credit or better
- High minimum annual income requirement
- High late fee
Upgrade
Bankrate's view
Upgrade is another online lender that offers same-day approval and next-day funding for eligible borrowers. Upgrade has more flexible eligibility requirements — including a low minimum credit score minimum of 600. That said, Upgrade’s maximum APR is higher than many of its competitors, which can leave you paying a significant amount more in interest.
Pros
- Allows co-borrowers
- Flexible credit requirements
- Fast approval and funding
Cons
- High maximum APR
- Origination fees
- Limited info available online
Long-term costs of a $20,000 personal loan
The overall cost of your loan depends on your interest rate and repayment terms. With some lenders, the cost will be higher because of additional fees like origination fees, prepayment penalties and late payment fees. You can use a personal loan calculator to estimate how much you will pay in interest based on your APR and loan terms.
Choosing a lender that has minimal or no fees can lower your costs. You can also reduce your overall cost by choosing the shortest term available. The tradeoff is that your monthly payments will be higher.
For example, a $20,000 loan with an annual percentage rate (APR) of 8.99 percent and a five-year term will cost more than a $20,000 loan with an APR of 12 percent and a three-year term. A longer term means your monthly payment will be lower, but the amount you pay in interest can be thousands of dollars more expensive.
| Repayment term | APR | Monthly payment | Interest paid | Total cost |
|---|---|---|---|---|
| 3 years | 8.99% | $636 | $2,892.46 | $22,892.46 |
| 5 years | 8.99% | $415 | $4,904.20 | $24,904.20 |
| 3 years | 12% | $664 | $3,914.30 | $23,914.30 |
| 5 years | 12% | $445 | $6,693.34 | $26,693.34 |
How to determine if you need a $20,000 loan
A $20,000 personal loan isn’t always the right choice. If you want to get a large personal loan, it will come with costs and debt to manage. However, it could be a beneficial choice in some cases.
Benefits of a $20,000 loan
Personal loans are smart for consolidating high-interest debt and funding home improvements.
- Consolidating high-interest debt: If you have a large amount of credit card or other unsecured debt, a $20,000 debt consolidation loan can help you lower costs — if you qualify for a lower average interest rate.
- Funding home improvements: Depending on the type of home improvements you make, taking out a $20,000 personal loan to cover the costs could help you increase the value of your home.
Drawbacks of a $20,000 loan
Taking out such a large loan is a huge financial decision. If you take on more debt than you can afford to repay, there could be serious financial consequences, such as:
- Stretching yourself too thin financially: Before you take out a loan, review your finances to see whether you can afford to repay the loan. If you take on too much debt, you may find it difficult to contribute to essential financial goals like retirement.
- Damaging your credit: If you fail to repay your loan, it could cause major damage to your credit score. As a result, it may be harder for you to qualify for future loans like a mortgage or an auto loan.
Alternatives to $20,000 personal loans
If you can’t get approved for funding and prefer to explore other options, consider these alternatives:
- Home equity loan: A home equity loan is a second mortgage that allows you to convert a portion of your equity into cash. Rates are fixed and competitive, but you risk foreclosure if you fall behind on payments.
- Credit card: With a credit card, you’ll only pay interest on the funds you borrow and fail to repay within the grace period. The minimum monthly payment is likely smaller than a personal loan’s would be. However, the average interest rate of 20.75 percent means you could get trapped under a heap of ever-growing debt.
- Home equity line of credit (HELOC): HELOCs work like a credit card. You can access a revolving line of credit for a set period. The downside is that your home is used as collateral, so defaulting means it could be foreclosed.
- Loans from relatives and friends: With an amount this large, this is a less-likely option. If you do find a friend or family willing to float you, be sure to get the agreement in writing. Only commit to terms you can uphold to preserve your relationships.
Bottom line
Taking out a $20,000 personal loan is a major financial decision. Before starting your search, figure out if you actually need to take out such a large loan. Then, estimate your borrowing costs to see how much you’ll spend over the life of the loan.
If you determine that it’s the right move, be sure to compare personal loan rates and terms from multiple lenders to get the best deal.
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