How To Get A $40,000 Personal Loan

To get a $40,000 personal loan, research different types of lenders and shop around for the best offer. While there are quite a few lenders to choose from, qualifying for a $40,000 loan may be more difficult than with smaller loans. Comparing lenders that offer the best personal loan rates may help you save thousands of dollars in interest.

Lenders that offer $40,000 personal loans

You can get a personal loan from a credit union, local bank, online lender or peer-to-peer lender. Before applying, compare offers from top lenders to find the loan with the most competitive terms.

Bankrate’s view

LightStream aims to give the best rates to those with an outstanding credit history and solid finances. If you don’t need the loan proceeds right away, you get up to 30 days — or 90 days for home improvement loans — to defer the disbursement date and prevent interest from accruing.

For people shopping for the best rate, LightStream offers a Rate Beat program — if you qualify for a lower rate on another unsecured loan with the same terms, LightStream may beat that rate by 0.1 percentage points. In addition, this lender offers a generous rate discount worth 0.5 points for enrolling in autopay.

Pros

• Rate Beat program
• Autopay discount available
• No fees

Cons

• No option to prequalify
• Good credit required
• High minimum loan amount

Bankrate’s view

Happy Money offers loans specifically for credit card debt consolidation. Though this may seem limited, if your main goal is to pay off credit card debt, then it’s an excellent option to consider.

Unlike the many lenders that cap rates at 35.99 percent, Happy Money’s rates top out below 20 percent. This is lower than the average credit card APR of nearly 21 percent. The lender also offers direct payment to creditors, which streamlines the consolidation process.

Pros

• Ideal for credit card debt consolidation
• Partners with credit unions
• Limited fees

Cons

• No joint borrowers
• Does not accept bad credit
• Slower-than-average funding process

Bankrate’s view

SoFi is best known for its student loan refinancing products, but its personal loans are also among the best excellent credit borrowers will find. There are no mandatory fees of any kind — not even late fees. Interest rates are competitive and funds can be sent your way as soon as the same day.

It is also one of the few that accepts co-borrowers. Adding a joint borrower with a healthier credit history than yours can increase your chances of approval. Or it may help you qualify for the full $40,000 rather than a smaller amount.

Pros

• Accepts joint borrowers
• Optional origination fees
• Autopay discount

Cons

• Not available in all states
• Limited customer support hours

Bankrate’s view

If your credit score isn’t in mint condition, Best Egg is one of the few lenders that accepts applicants with a fair credit score. It also offers both unsecured and secured loans, which may help you qualify for a lower rate if you secure it with a high-value asset like your car or home fixtures. Excellent-credit borrowers may qualify for one of the lowest APRs in the personal loan market.

Pros

• Secured and unsecured loans available
• Low rates for qualified borrowers
• Direct creditor repayment available

Cons

• High origination fee
• High maximum APR
• Not available in all states

How to get a $40,000 personal loan

Here’s how to move forward if you’re ready to take the next steps toward securing a $40,000 personal loan:

1. Check your credit. Your credit profile and score play a major role in your approval odds and the price you’ll pay to take out a loan. Checking your score before you apply can help you determine which lenders are the best fit.
2. Review the eligibility criteria. Lenders generally look beyond your credit score as well to assess if your debt load and income meet their requirements.
3. Research lenders. Get prequalified with at least three lenders and compare your loan offers. The best loan is the one that offers the lowest overall cost of borrowing with a monthly payment you can afford.
4. Submit a loan application. Be sure to complete the form in its entirety and include the requested documentation needed to receive a lending decision.
5. Seal the deal. If approved, review the loan documents and sign to finalize the transaction.
6. Receive the loan proceeds. Most loans are disbursed electronically to your bank account within a few business days.

Common personal loan requirements

You must meet certain requirements to qualify for a personal loan. While each lender sets its own eligibility standards, these are the metrics most will review before making a lending decision:

• Credit score: This three-digit number shows how well you have handled credit in the past. To qualify for a $40,000 loan, you’ll typically need a credit score of 670 or higher, or a cosigner with excellent credit. That’s because a higher loan amount involves a higher risk for the lender, so most will limit large amounts to those with good credit scores.
• Sufficient income: You must demonstrate that you have sufficient income to repay the loan. Most lenders will request proof of income, whether it is a paystub, W-2 or tax return.
• Documentation: You will need to provide a government-issued ID and proof of address, among other required loan documents, to get approved.
• Debt-to-income (DTI) ratio: Your debt-to-income ratio is your total monthly debt obligations divided by your pre-tax monthly income. Typically, the lower your DTI, the better. Most lenders prefer a DTI under 36 percent, especially for larger loan amounts.

Long-term costs of a $40,000 personal loan

When you borrow a personal loan, you’ll repay the loan amount plus interest and any applicable fees in equal monthly installments. Interest rates, which are expressed as an APR (annual percentage rate) on loans, include both interest and fees and vary by credit rating, loan type and the lender you select.

Let’s say you take out a $40,000 loan with an APR of 12.5 percent, which is close to the average personal loan rate. Here’s a look at the monthly and overall costs, depending on loan term:

Opting for a six-year repayment term means paying more than $8,000 in additional interest compared to a three-year term. Before taking out a loan, use a personal loan calculator to estimate both your monthly payment and your overall borrowing expenses.

How to determine whether you need a $40,000 loan

Taking out a $40,000 loan means assuming a hefty monthly payment for years and risking credit score damage if you can’t keep up. Before applying, assess why you need the funds and determine whether it’s an urgent need or if you can hold off and save up.

Here are some instances where a $40,000 loan could make sense:

• You have a real need and want to build your credit score. Payment history is the most significant component of your credit score. By making timely loan payments, you can improve your credit health in the long run.
• You’ll earn a return on the money. Completing home improvement projects is often expensive, but kitchen remodels, basement conversions and energy-efficient enhancements can increase your property’s value.
• You can save money on interest. If you’re battling high-interest credit card debt, taking out a debt consolidation loan could save you hundreds — if not thousands — of dollars in interest, depending on your rate. This can make it easier to pay off your debt faster, plus decrease your credit utilization ratio, which can improve your score.

If you decide to take out a personal loan, make sure you know how much you will owe each month and have a plan to pay it back. You should also have the means to comfortably afford the monthly payments.

Alternatives to borrowing a $40,000 personal loan

You may find that taking out a $40,000 personal loan isn’t in your best interest. If so, here are some alternatives to consider that could work better for you:

• Home equity loan: You can borrow against the equity in your home and repay the loan proceeds over time through a fixed monthly payment. Despite the competitive rate these loans offer, they are secured, which means you could lose your home if you default, and funding times are slower.
• Home equity line of credit (HELOC): Like a credit card, a HELOC allows you to access a revolving line of credit rather than receive the proceeds in a lump sum. Lenders only charge interest on what you borrow, but the rate is variable. Plus, you run the same foreclosure risk if you fall behind on payments.
• 401(k) loan: If you have sufficient savings in your 401(k), you may choose to borrow from your retirement fund. You won’t have to undergo a credit check, and you’ll have five years to repay the loan. But a 401(k) loan can be risky — if you change jobs or are terminated, you must repay the debt in full before the next tax day.
• Personal savings: You can cover the expense or purchase on your own and avoid lending hoops, monthly loan payments or interest. This approach is ideal if time is on your side.

Bottom line

When considering a $40,000 personal loan, think about the overall cost of the loan and whether the cost is worth it. Though each lender has its own requirements, it’s likely that you’ll need strong credit and a high, stable income to qualify for a loan that size.

Crunch the numbers with the help of a calculator to ensure you don’t borrow more than you can comfortably afford to repay. Research your options carefully and compare offers from multiple lenders to find the best loan for your needs.