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Where to get a $40K personal loan

By Taylor Medine and Nick Dauk
Published  December 23, 2022 3:57pm EST
Personal Finance
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A $40,000 personal loan can be used for a variety of expenses, but remember that your credit history and other factors will impact your overall loan costs. (iStock)

Whether you need to consolidate credit card debt, pay for a medical procedure, fund a home improvement project or cover another major expense, a personal loan might be a good option. If you decide to take out a large personal loan – such as a $40,000 personal loan – it’s important to carefully consider your lender options to find a loan that best suits your needs.

Here’s what you should know before getting a $40,000 personal loan.

Credible makes it easy to compare personal loan rates from multiple lenders.

Where to get a $40K personal loan

You have many lender options to choose from when applying for a personal loan. Banks and credit unions, as well as online lenders, may offer you different interest or term rates depending on your personal financial situation. Consider your unique needs and financial goals when determining which lender is the right one for you.

Online lenders

Online lenders can be one of the most convenient options for getting a loan. You can often apply in just a few minutes, and will likely get a quick approval decision. If you’re approved for an online personal loan, you can generally expect to get your funds within five business days— though some lenders will fund approved loans as soon as the same or next business day.

If you decide to take out a personal loan, be sure to consider as many lenders as possible to find the right loan for you. An online platform like Credible makes this easy — you can compare prequalified rates from our partner lenders in minutes. 

Banks 

Banks are the traditional lending institution that many borrowers go to first when exploring personal loan options. Your bank may offer special rates or terms for existing customers that meet certain criteria. You might also be able to apply for a personal loan through a bank’s website instead of visiting a local branch in person.

Credit unions

Similar to banks, credit unions are another traditional financial institution that offers personal loans to borrowers. Like banks, you may be able to apply for a personal loan online instead of in person. Unlike banks, credit unions are not-for-profit organizations, which means they might offer better rates or terms on a personal loan. But keep in mind, to get a credit union loan, you’ll typically need to be a member and meet certain criteria as well. 

What credit score do you need for a $40,000 loan?

Each lender will generally require a minimum credit score for a personal loan. Most will want a score in the good or fair range. Some lenders will work with borrowers with credit scores in the lower fair or poor range, but they’ll likely charge a higher interest rate to borrow money.  

To qualify for a $40,000 personal loan, you’ll usually need a score exceeding 600 and should aim to improve your credit score to 620 or higher prior to applying. Keep in mind that borrowers with higher credit scores usually stand the best chance of getting a lower interest rate. The lowest interest rates are usually given to borrowers with good-to-excellent credit scores.

Along with your credit score, lenders will assess other aspects of your financial situation to determine if they should lend to you. These factors include your debt-to-income ratio and overall income. 

What is the monthly payment on a $40K loan?

How much you’ll pay for a $40,000 personal loan mostly depends on your credit, the repayment term you choose and the interest. 

Generally, the higher your credit score, the lower the interest rate you might qualify for — which means you’ll pay less in interest over the life of your loan.

For example, here’s how credit scores affected average personal loan interest rates and payments offered to borrowers applying for three-year personal loans through the Credible marketplace in October 2021:

  • 720 to 779 — Borrowers with credit scores in this range were offered an average APR of 12.30%. If you took out a $40,000 loan at that rate with a three-year term, you’d pay $8,035 in interest over the life of the loan, and your payments would be $1,334 per month.
  • 640 to 679 — Borrowers with scores in this range received an average APR of 23.97%. On a $40,000 personal loan with a three-year term, you’d pay $16,473 in total interest charges and have a payment of $1,569 per month.
  • 600 to 639 — Borrowers with these credit scores were offered 29.41% APR. On a $40,000 personal loan with a three-year term, you’d pay $20,666 in total interest charges and have a payment of $1,685 per month.
  • 599 or lower — Borrowers with low credit scores in this range were offered APRs that averaged 32.16%. On a $40,000 personal loan with a three-year term, you’d pay $22,846 in total interest with a monthly payment of $1,746.

As you can see, your credit score can make a huge difference in how much a personal loan will cost you overall. If you decide to take out a personal loan, it’s a good idea to consider how much that loan will cost you — this way, you can prepare for any added expenses. 

A personal loan calculator can help you understand how different interest rates and loan terms will affect your monthly payment amount and overall cost. 

Comparing $40K personal loan lenders

Although you may find several lenders that’ll loan you $40,000, not every lender will extend the same interest rate or terms. That’s why it’s important to compare multiple lenders when looking for a personal loan, and consider the following factors:  

  • Loan amount: Depending on factors like your credit score, you may not be approved for a loan amount as high as $40,000. 
  • Repayment term: The length of your loan repayment term will impact how much interest you pay. Keep in mind that a low interest rate with a longer repayment term may actually cost you more than a slightly higher interest rate with a shorter term.
  • APR and interest rate: It’s important to understand that the APR and interest rate are not the same. The APR is the total cost of the loan including the interest rate and any fees or expenses associated with it.
  • Fees: Lenders may charge additional fees, such as origination fees, which help cover the cost of processing your loan application. These will ultimately contribute to the overall cost of the loan. 
  • Funding time: While some lenders may be able to distribute funds within a few business days, others may take up to a week or more. If you’re using these funds for an emergency, be sure to confirm the distribution period prior to accepting the loan.  

How to apply for a $40,000 personal loan

If you’re ready to apply for a $40,000 personal loan, follow these four steps:

1. Check your credit. Lenders will review your credit report and scores to make a decision on your application and interest rate. It’s a good idea to check your credit before you apply to make sure it’s in good shape. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, dispute them with the appropriate credit bureaus to potentially boost your credit score.

2. Compare lenders and pick a loan option. Be sure to compare as many lenders as you can to find a loan that’s right for you. Consider not only loan amounts and rates but also repayment terms and any origination fees charged by the lender. After you’ve compared lenders, choose the loan option that works best for you.

3. Complete the application. Once you’ve chosen a lender, you’ll need to fill out a full application and submit any required documents, such as tax returns or pay stubs. 

4. Get your funds. If you’re approved, the lender will have you sign for the loan so the funds can be sent to you. The time to fund personal loans is usually about one week — though some lenders will fund approved loans as soon as the same or next business day. 

Before you apply for a personal loan, remember to shop around and compare as many lenders as possible. This way, you can find a loan that suits your needs.  

Personal loan FAQs

If you have questions about loan requirements and what you can use a personal loan for, here’s what you need to know. 

Can you get a personal loan with bad credit? 

Yes, there are several lenders that work with borrowers who have bad credit. But it might be difficult to qualify for a personal loan amount as large as $40,000.

If you’re struggling to get approved, consider applying with a cosigner to improve your chances. Not all lenders allow cosigners on personal loans, but some do. Even if you don’t need a cosigner to qualify, having one could help you get lower interest rates than you’d get on your own. 

What are the eligibility requirements for a personal loan? 

Requirements to qualify for higher loan amounts will vary between lenders. But there are some common eligibility criteria that you’ll likely come across, including:

  • Good credit — To qualify for a personal loan as large as $40,000, you’ll typically need good to excellent credit.
  • Verifiable income — Lenders want to see that you can afford to repay the loan, which means you’ll need to provide information about your income as well as documentation to verify it. For example, you’ll typically need to submit pay stubs and tax documents.
  • Low debt-to-income ratio — Your debt-to-income (DTI) ratio is a percentage that shows how much of your monthly income goes toward debt payments. Lenders will check your DTI ratio to make sure you have enough income to cover the new loan payments on top of your other commitments — in general, lenders like to see that your DTI ratio is below 40%. You can calculate your debt-to-income ratio by dividing your total monthly debt payments by your monthly income.

Keep in mind that lenders might also have other requirements to qualify for a personal loan. Be sure to double-check with the lender before you apply, so there aren’t any surprises.

What can you use a personal loan for?

The good news is that a personal loan can be used for a variety of different purposes, like paying off medical bills and home renovations. Unfortunately, a personal loan can’t be used for every financial expense you’re facing. 

Debt consolidation, tax debts, financing a vehicle purchase and unexpected expenses like emergency repairs can usually be covered under a personal loan. But typically, you can’t use it to cover expenses like college tuition, a down payment on a home and business expenses. 

Remember to research and compare multiple lenders to identify a $40,000 personal loan option that fits your needs. This is easy with Credible — you can see your prequalified rates from multiple lenders in minutes.

Personal loans vs. credit cards: How do they compare?

A loan for $40,000 is a significant amount of debt to take on. You may be wondering whether taking out a personal loan or charging expenses to your credit cards is the most responsible decision. 

Personal loans may be unsecured or secured. A secured loan requires you to put collateral down. Credit cards don’t require collateral, but they typically have higher interest rates than personal loans. 

Personal loans have fixed rates, which means you have a set monthly payment to reach a preset payoff date. Credit cards don’t have a fixed payoff date, which means you may be tempted to pay only the minimum amount each month, keeping you in debt for longer. 

If you’re trying to secure $40,000, it may be a better option to take out a personal loan if you qualify for lower fixed interest rates. This will likely limit how much overall interest you’ll pay compared to putting this high balance on a credit card.