SoFi

If you need cash to cover an emergency expense, like a car repair or medical bill, a payday loan or an installment loan are two options you may consider. However, these two loans are different in key ways that are crucial to understand before making a choice between them. Namely, a payday loan tends to have a short turnaround before you need to pay it off, and typically offers extremely high interest rates.

We’ll explain more about the features of each loan type, and why people choose payday loans vs installment loans.

What Is a Payday Loan?

There is no set definition of a payday loan. Generally speaking, they are short-term loans that are due to be paid back on your next payday. Payday loans don’t charge interest per se, but they do charge high fees.

Payday loans are typically for relatively small amounts. In fact, many states limit the amount of a payday loan to $500. Borrowers usually repay the loan in a lump sum on their next payday. The specific due date is often between two and four weeks from when the loan was made.

To repay the loan, borrowers must make out a post-dated check to the lender for the full balance of the loan plus any fees. As an alternative, borrowers can give permission for the lender to electronically debit the funds from their bank account on a certain date. If the borrower doesn’t repay the loan by the due date, the lender can cash the check or debit the funds — either way, the lender gets paid.

In some states, borrowers may be able to roll over the amount of the loan, paying only the fees when it comes due, while the lender pushes out the due date.

Risks of a Payday Loan

The risks of payday loans include sky-high fees and the potential for falling into a cycle of debt. Many states set a limit on payday loan fees, but they can still run from $10 to $30 for every $100 borrowed. Consider that a $15 fee for $100 is the equivalent of nearly 400% APR. By comparison, the average personal loan interest rate is 9.41%, according to the Federal Reserve of St. Louis.

Pros and Cons of Payday Loans

Before signing on for a payday loan, carefully consider the advantages and disadvantages.

Pros of Payday Loans	Cons of Payday Loans
Provide quick access to cash, often with same-day turnarounds.	Very expensive, with fees equivalent to a 400% APR.
No credit check required. To qualify, you typically need to be 18 years old, have a government I.D., bank account, and regular source of income.	Lenders don’t consider your ability to repay the loan, and the loan doesn’t help you build credit. As a result, these lenders are considered “predatory.”
Unsecured: Borrowers are not required to put up property as collateral.	Borrowers can get trapped in a cycle of debt. If they are unable to pay back the loan, borrowers will pay expensive fees each time they roll over or renew their loan.

What Is an Installment Loan?

When a borrower receives an installment loan, their lender will give them a lump sum upfront, which the borrower has to repay in fixed payments with interest over a set period of time. Personal loans are a good example of an installment loan.

They can range in size from a few hundred dollars to $100,000, and the money can be used for any reason, from covering unexpected expenses or consolidating debt to remodeling a home. Repayment terms may stretch from a few months to a few years.

How Installment Loans Work

During the loan application process, lenders will consider factors such as a borrower’s credit score and reports, their income, and the amount and length of the loan.

Typically, borrowers with good credit scores will receive the best terms and interest rate options. These loans may have variable interest rates or fixed, meaning they don’t change over the life of the loan.

Installment loans may be secured or unsecured. Unsecured loans, such as unsecured personal loans, do not use collateral to back the loans. Secured loans do require collateral and may offer borrowers a lower interest rate since they present less risk to the lender.

Recommended: How to Get Approved for a Personal Loan

Pros and Cons of Installment Loans

Personal installment loans tend to offer borrowers the option of borrowing at lower rates than are available through revolving credit or payday loans. However, it’s still important to consider disadvantages in addition to benefits.

Pros of Installment Loans	Cons of Installment Loans
Borrowers can finance a big purchase over a period of up to several years. .	Interest rates may be higher than other alternatives, such as a home equity line of credit.
Payments typically remain fixed over the life of the loan, unless the borrower chooses a variable interest rate.	May be subject to fees, such as closing costs.
Secured loans don’t require collateral, while unsecured loans may offer lower interest rates.	Missed payments can damage credit scores. Defaulted loans may be sent to collections.

Payday Loans vs Installment Loans: Key Differences

By now you’ve likely got a good sense that installment loans and payday loans differ in some important ways. Here’s a side-by-side comparison.

	Payday Loans	Installment Loans
Repayment terms	Payment is due on the borrower’s next payday, usually two to four weeks from the date the loan was taken out.	Loan is repaid in regular installments, often monthly, typically over 2 to 5 years.
Loan amounts	Often limited to $500.	Can range between a few hundred dollars and $100,000.
Interest rates	Payday loans don’t charge interest, but they do charge costly fees that can be the equivalent of up to 400% APR.	Interest rates vary, depending on a borrower’s credit history, among other factors. The average personal loan interest rate is 9.41%.
Use cases	Payday loans are typically targeted to borrowers with poor credit and few other lending options. Loan money can be used for any reason.	Some installment loans, such as auto loans or mortgages, are limited in how they can be used. Personal loans can be used for any purpose.
Risk	Payday loans are predatory loans that can trap borrowers in a cycle of debt. Lenders don’t consider a borrower’s ability to repay the loan, and the loan won’t help build credit.	Failure to repay an installment loan on time can damage credit. Defaulting on secured loans may result in loss of property.
Credit requirement	None.	The application process for installment loans requires a credit check.

Why You Should Avoid Payday Loans

Payday loans are usually predatory in nature and should be avoided. Fees make them an expensive form of credit. If you don’t have the money to repay it on the due date, lenders may try to cash the post-dated check, which will bounce, triggering fees. Or if you provided your bank account information, the lender may try to withdraw the funds, triggering overdraft fees with each attempt.

Payday lenders might also sell your loans to a debt collector, which can lead you to being harassed by collections calls.

Explore SoFi’s Low-Rate Personal Loan Options

Payday loans and installment loans both provide quick cash to cover emergency expenses. However, because of their astronomical fees — equivalent to a 400% APR — payday loans fall under the heading of “predatory lending.” On the other hand, installment loans vary in their terms but generally are a much better deal, provided that you meet eligibility requirements.

Considering options for borrowing? Check out personal loans from SoFi with low fixed rates on loans between $5,000 and $100,000. What’s more, personal loans from SoFi charge no fees and offer funding as quickly as the same day the loan is approved.

Compared with high-interest credit cards and payday loans, a SoFi Personal Loan is simply better debt.

FAQ

Are payday loans installment loans?

No, payday loans usually require you to pay off the loan amount in full on your next payday, usually two to four weeks from when the loan was made.

What is an installment loan?

When you take out an installment loan, you immediately receive the money you’re borrowing. You then pay it back to your lender in a series of regular fixed payments known as installments.

Are personal loans installment loans?

Personal loans are one type of installment loan. Money from the loan can be used for any purpose, such as debt consolidation or a home remodel.

---

Photo credit: iStock/Prostock-Studio
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOPL0622008

Read more

You’ll likely need a credit score in the Good range (670 to 739) or higher to qualify for a $20,000 personal loan with a competitive interest rate. If your credit rating is Poor or even on the lower end of Fair, you may have difficulty getting approved for a personal loan.

Personal loans offer relatively low interest rates compared with other options, such as high-interest credit cards. Ultimately, the interest rate will depend on the size of your loan, the term, and your credit score.

Here’s a closer look at what it takes to apply for a personal loan this year.

Can I Get a $20,000 Personal Loan with Bad Credit?

Your credit score helps banks understand your history of managing debt. A high score suggests that you have a history of paying your bills on time while managing multiple accounts. As a result, banks see borrowers with high scores as at relatively low risk of default. Therefore, they may offer these borrowers better terms and interest rates on loans.

Lenders see borrowers with low scores as risky. To compensate for this risk, they may charge higher interest rates, if they offer a loan at all. It may be more difficult for those with bad credit to find a $20,000 personal loan, or to find one they can afford.

What Is the Typical Credit Score Required for a $20,000 Personal Loan?

When applying for a loan, a FICO® credit score in the Good range (670 to 739) or higher will help you qualify for loans with better interest rates from a wider variety of lenders.

If you have Poor credit (a FICO score of 300 to 579), or even in the low end of the Fair range (580 to 669), you may have difficulty getting approved for a personal loan.

If this is the case, all is not lost. You can work to raise your credit score by paying down debts and making sure to always make payments on time.

What Can You Use a $20,000 Personal Loan for?

A personal loan is money that you borrow from a bank, credit union, or online lender that you pay back in regular installments with interest, usually over about two to seven years. One feature of personal loans is the flexibility it provides borrowers in how they can spend their funds. Here are a few common options:

Debt Consolidation

Debt consolidation is one of the most popular uses for personal loans. If your current debt carries high interest rates, you may be able to pay it off in one fell swoop, combining all of your debt under a lower interest rate. Consolidating confers a number of advantages, including saving money in interest and replacing several debts with just one payment, which may be easier to keep track of and pay off on time.

If you consolidate credit cards, be wary of running up more debt on your cards while you pay off your personal loans. You don’t want to increase the amount of debt you’ve taken on.

Medical Expenses

If you’ve had an accident or unexpected illness, and you find yourself with growing medical bills, you may consider a personal loan to help you get them under control. Medical bills can be extremely pricey, so before committing to a loan, see if there is a way to negotiate the price down.

You may also be able to negotiate a payment plan that allows you to pay off your bill in installments, which might be more manageable and wouldn’t require taking out a loan that saddles you with interest payments.

Home Improvements

Borrowing money for home improvements is sometimes necessary and smart. For example, repairing a leaking roof in a timely manner can help prevent further damage to your home, which could cause pricier repairs down the road. In some cases, improvements or remodels can increase the value of your home.

That said, beware of taking out loans for home improvements that are simply “wants.” For example, it may not be prudent to borrow money to install a hot tub.

Funeral Expenses

In 2021, the median cost of a funeral was approximately $7,848, according to the National Funeral Directors Association. Personal loans may be an option for those who can’t afford to pay these expenses out-of-pocket.

Vacation Expenses

You can use a personal loan to pay for anything, but should you? The answer is likely no. When it comes to discretionary spending, like vacations, consider saving up money from your paycheck to cover the cost. Otherwise, because you’re paying interest, your vacation could end up costing you a lot more than the sticker price.

What’s more, if you miss a payment, you’ll be putting your credit score in jeopardy, which may not be worth it for a few days of fun in the sun.

Recommended: 11 Types of Personal Loans

Applying for a $20,000 Personal Loan

To secure your money, you’ll need to get approved for a personal loan. Once you know how much you want to borrow, you may consider getting prequalified for a loan. Lenders will ask you to provide basic information, including your address, income, and Social Security number. They may then perform a soft credit check that won’t hurt your credit score.

Finally, they’ll offer you a prequalified quote, including how much money you qualify to borrow, your monthly payment, and your interest rate. You can use this process to shop around with a few lenders to secure the best quote.

Once you’ve decided which lender to go with, you’ll submit an application. You’ll need to provide proof of income, address, and employment, and you’ll need to submit to a hard credit check.

Recommended: Personal Loan Calculator

Applying for Other Small Loan Amounts

If you don’t qualify for a $20,000 personal loan that you can afford based on your credit, you might consider taking out a smaller loan, such as a $3,000, $5,000, $10,000, or $15,000 personal loan. Smaller loans present less risk to lenders, so you may be able to qualify with a lower score.

The Takeaway

To get the best terms and interest rate for a $20,000 personal loan, you’ll likely need a Good credit score (670 to 739). But no matter your score, shop around and consider using prequalification to find the loan that’s best for you.

Consider personal loans from SoFi, which have no fees and offer low rates for loans of $5,000 to $100,000. Borrowers can receive funds as quickly as the same day their loan is approved.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

FAQ

What credit score is needed for a $20,000 personal loan?

To access personal loans from a broad array of lenders offering the best interest rates, you’ll need a credit score of at least 670.

Where can I get a $20,000 loan with bad credit?

Some lenders may offer you a personal loan if you have bad credit. However, they may charge much higher interest rates.

What’s the monthly payment on a $20,000 personal loan?

Your monthly payment will depend on the term you choose and your interest rate. Typically, shorter terms will carry higher monthly payments and lower interest rates, while longer terms will have smaller monthly payments and higher interest rates.

---

Photo credit: iStock/AsiaVision

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOPL0322016

Read more

Subprime personal loans provide financing to people with poor credit who cannot qualify for a conventional prime-rate loan. Borrowers who have poor credit have a higher risk of defaulting on loans, so lenders protect themselves by adding charges to the loans. These charges come in the form of higher interest rates, longer term lengths, and higher financing fees.

Read on to learn how subprime personal loans work, the different types of loans, some alternatives to these high-interest loans, and whether they might be an option for you.

What Is a Subprime Personal Loan?

A subprime personal loan is a loan that caters to borrowers with subprime credit, who are considered to be at a high risk of default. A subprime lender will charge a higher interest rate and set longer loan terms to cover the cost of their risk.

There are fairly rigid credit score requirements for a personal loan. The Consumer Financial Protection Bureau lists five credit score levels; the first column shows what type of loan someone will qualify for.

Credit Level	Credit Score
Deep subprime	Below 580
Subprime	580–619
Near-prime	620–659
Prime	660–719
Super-prime	720 and above

A borrower with a FICO score below 620 will find it difficult to secure a loan from a traditional lender. Many online lending platforms allow consumers to search a network of subprime personal loan lenders to find the best deal. Borrowers submit a loan application online to pre-qualify.

Subprime loans have certain characteristics. They may require a larger down payment. Someone with a fair credit score who takes out a car loan may have to pay 5% down, whereas someone with poor credit might have to put 10% down. A subprime loan may come with an adjustable interest rate or a fixed interest rate.

Types of Subprime Loans

There are four main types of subprime loans: interest-only, fixed-rate, adjustable-rate, and dignity loans.

Recommended: Personal Loan Interest Rates Now

Interest-Only Subprime Loan

Sometimes called exotic loans, an example of an interest-only loan is an adjustable-rate mortgage where the borrower pays only the interest for the first few years before beginning to cover some of the principal. If interest rates have gone up, the payments can become huge.

Pros of Interest-Only Subprime Loan	Cons of Interest-Only Subprime Loan
Initial monthly payments are lower	The borrower is often not aware that interest rates could skyrocket in the future
An interest-only loan can be paid off faster than a traditional loan	Borrowers may rely on having more income in the future to meet the higher payments
Flexibility: Borrowers can use extra cash to pay off the principal earlier	In the case of a mortgage, if housing prices fall, the mortgage debt may exceed the value of the home

Fixed-Rate Subprime Loan

Fixed-rate subprime loans allow the borrower to lock into a fixed interest rate for the life of the loan. The monthly payments don’t change, so there are no surprises for the borrower. However, the terms of these loans are longer, and borrowers pay more interest over the life of the loan.

Pros of Fixed-Rate Subprime Loan	Cons of Fixed-Rate Subprime Loan
Interest rates are the same for the life of the loan	Long repayment period (30 years or more), so the borrower pays more for the loan
Monthly payments don’t change	No flexibility

Adjustable-Rate Subprime Loan

Interest rates on an adjustable-rate subprime loan are fixed for an initial period. After that, the interest rate will become variable, and your monthly payments will go up and down with market interest rates.

Pros of Adjustable-Rate Subprime Loan	Cons of Adjustable-Rate Subprime Loan
Interest rate is fixed for an initial period	Once the initial period is over, the interest rate will increase
Interest rates can be low initially, so the borrower has cash that can be invested elsewhere	Budgeting for the future is difficult because future payments are uncertain

Dignity Subprime Loan

For a dignity subprime loan, borrowers put down 10% of the loan amount to qualify. The interest rate is higher initially. Then the rate changes to the prime rate if the borrower has kept up with the payments.

Pros of Dignity Subprime Loan	Cons of Dignity Subprime Loan
If you keep up with the payments, the interest rate will drop to the prime rate	A 10% down payment is required. The initial interest rate is high
Interest rates can be low initially, so the borrower has cash to invest elsewhere	Budgeting for the future is difficult because future payments are uncertain

Pros and Cons of Subprime Personal Loan

The advantages and disadvantages of subprime personal loans center around the interest rates and fees. How disciplined the borrower is in their money management is also a factor.

Pros of Subprime Personal Loan

The pros of a subprime personal loan can be summed up as “perceived affordability.”

Adjustable Interest Rate

Adjustable interest rates are a double-edged sword. On the one hand, subprime loans with an adjustable rate are attractive because the initial rate is low. This frees up cash that savvy borrowers can use to earn money elsewhere or pay off the loan principal sooner. However, once the initial period is over, the rate can skyrocket with market rates.

Longer Repayment Period

A longer repayment period means that the borrower will have lower payments. However, they will end up paying more in interest over the life of the loan. Still, lower payments can be beneficial, particularly if the loan has a fixed interest rate, and the borrower knows exactly how much they must pay each month.

Cons of Subprime Personal Loans

The perceived affordability of subprime personal loans comes with trade-offs.

Higher Interest Rate

Subprime loans have significantly higher interest rates than prime loans. That means a subprime borrower can pay much more in interest over the life of their loan. For example, the median personal loan rate for a borrower with a credit score of 700 is 10.93%, whereas the median rate for a borrower with a 600 score is 15.91%.

An adjustable rate loan may have a low initial interest rate, but higher rates will eventually increase your monthly payments substantially.

Higher Fees

Subprime personal loan lenders charge higher fees to subprime borrowers to cover the cost of potential default.

Pros of Subprime Personal Loan	Cons of Subprime Personal Loan
Flexibility from adjustable interest rates	Higher interest rates
Longer repayment periods	Higher fees

What Credit Score Is Required for a Subprime Personal Loan?

According to the Consumer Financial Protection Bureau, credit scores of 620 and below qualify for a subprime personal loan.

The Impact a Subprime Personal Loan Has on Your Credit

Taking out a subprime loan will not affect your credit score. When a lender runs a credit check on a potential borrower, it affects the credit score a few points, but that is the same regardless of the type of loan.

On the other hand, how you manage the payments can affect your score. Making regular payments can boost your credit because your payment history improves. You may then be able to qualify for a prime-rate loan once you have paid down your debt.

Top 3 Subprime Loans

Here are the top three subprime lending platforms based on a Google search at the time of writing. Lending platforms allow borrowers to search a network of subprime lenders for the best loan terms.

CashUSA.com

Loans are available from $500 to $10,000. The subprime personal loans can be used for any purpose, and funds are deposited into the borrower’s bank account. There are no initiation fees.

For subprime personal loans, direct lenders offer APRs between 5.99% and 35.99% and loan durations from 90 days to 72 months. The site gives the following example: A two-year loan of $1,500 with an APR of 7.9% requires 24 monthly payments of $67.77, for a total amount payable of $1,626.54.

BadCreditLoans.com

Loans are available from $500 to $10,000. Funds are deposited into the borrower’s bank account the next business day. This lender charges no initiation fees.

Lenders from the site’s network offer APRs between 5.99% and 35.99%, with loan durations from 90 days to 72 months. The site gives the following example: A 12-month loan of $2,000 with an APR of 19.9% requires 12 monthly payments of $183.63, for a total amount payable of $2,203.56.

PersonalLoans.com

Loans are available from $500 to $35,000. Funds are deposited into the borrower’s bank account within one business day.

Lenders from the site’s network offer APRs between 5.99% to 35.99% and loan durations from 90 days to 72 months. The site gives the following example: A two-year loan of $8,500 with an APR of 6.99% requires 24 monthly payments of $380.53, for a total amount paid of $9,132.68.

Getting a Subprime Loan

Subprime personal loan lenders list few requirements. But the process for a subprime loan is generally the same as the steps to get any personal loan.

1.    Check your credit score. Look for any errors on your report that could be erased to boost your score. (Checking your own score doesn’t affect your rating.)

2.    Compare multiple lenders. Shop around for the best rate and term. Your current bank or credit union might offer good subprime terms to existing account holders.

3.    Select a lender. Make sure you understand the interest rate, repayment terms, and fees.

4.    Gather your documentation. Scan them ahead of time for quick uploading. Applicants are typically required to show:

a.    Proof of identity. Such as a driver’s license or passport.

b.    Proof of address. You can use a utility bill, rental agreement, voter registration card, or insurance card for your home or car.

c.    Proof of income. Choose from a paycheck, W2 or 1099, tax return, or bank statement showing paycheck deposits.

d.    Current monthly expenses. Use a bank statement, and highlight your major monthly bills.

5.    Complete the application. Once approved, you’ll need to sign for the loan to receive the funding.

Alternatives to Subprime Personal Loans

Subprime personal loans are not ideal. If you find yourself in the bad credit score range, consider alternatives like borrowing from friends or family, getting a cosigner to help you get a loan or credit card, or selling some of your assets to provide immediate cash.

For the future, try to improve your credit by paying debts on time, and check your credit report for errors.

The Takeaway

Subprime personal loans are typically offered by online lenders that cater to customers with a low credit rating who cannot qualify for loans with conventional financial institutions. Subprime lenders charge high-interest rates and financing fees to cover the risk of default. You can choose a fixed or adjustable interest rate.

3 Personal Loan Tips

1. Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.
2. Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.
3. In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.

FAQ

What credit score do you need to get a subprime personal loan?

According to the Consumer Financial Protection Bureau, credit scores of 620 and below qualify for a subprime personal loan.

What are subprime personal loans?

A subprime personal loan caters to borrowers with subprime credit. That means they are considered at a high risk of default, so a lender will charge them a higher interest rate and set longer loan terms to cover the cost of their risk.

What are the requirements for subprime personal loans?

To obtain a loan, borrowers must submit a loan application online and provide financial documents to show they can manage the payments.

---

Photo credit: iStock/shapecharge

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPL0222014

Read more

Personal loans used to be considered a last resort to resolve cash flow issues. Today, according to the U.S. Chamber of Commerce, personal loans are the fastest growing lending vehicle in the nation. Personal loans are appealing partly because of their flexibility. They can be used for almost any purpose, whether to fix up a home or consolidate credit card debt. Borrowers can receive anywhere from $1,000 to $100,000, choose a fixed or variable interest rate, even select the length of the loan.

Read on to find out more about how personal loans work, how to qualify, their advantages and disadvantages, and whether a personal loan is right for you.

What Is the Required Credit Score for a $15,000 Personal Loan?

You will likely need a credit score of at least 660 for a $15,000 personal loan. Many lenders don’t state a minimum required credit score because they will vary the terms for each borrower depending on their credit history. The higher your score, the more money you can qualify for and the better the interest rate.

Benefits of a $15,000 Personal Loan

A $15,000 personal loan is a sizable amount that can serve many purposes. Common personal loan uses include making large purchases, covering living expenses for a defined period, consolidating debt, and paying off a credit card with a higher interest rate. Here are some other benefits:

Interest Rates and Flexible Terms

There are many types of personal loans, and interest rates can be fixed or variable. The interest rate that a lender charges will depend on the borrower’s credit rating and the length of the loan, but rates are typically lower than for other forms of debt. Loan lengths can vary from a few months to a few years.

No Collateral Required

Personal loans are typically unsecured, which means no collateral is required. If you don’t qualify only for an unsecured loan, you may select a loan cosigner with a stronger credit rating to help you get approved.

Recommended: Guarantor vs Cosigner

Fixed Monthly Payments

Most personal loans have fixed monthly payments based on the amount borrowed, the interest rate, and the term. This makes budgeting easier because the borrower knows how much they must pay each month.

Recommended: Try Our Personal Loan Calculator

Cons of a $15,000 Personal Loan

One disadvantage of a $15,000 personal loan is that it can be expensive, especially if you have bad credit or need to spread the payments out over many years. The longer the term, the more you will pay in interest. Here are some other issues to consider:

Taking on Debt

If you already have trouble paying your monthly bills, taking on more debt may not be a good idea. Some borrowers use a personal loan to consolidate other debt that charges higher interest, such as credit cards. For people who have a tendency to overspend, freeing up their credit may just encourage them to spend more again.

Higher Payments Than Credit Cards

Credit cards do not have a deadline to pay off the entire debt. For that reason, the monthly minimum payment is typically less than the payment on a personal loan. If a personal loan is used to consolidate credit card debt, some borrowers may find it difficult to make the higher payments of a personal loan.

Origination Fees and Prepayment Penalties

Some lenders will charge an origination fee to cover the cost of setting up the loan. Additionally, if the borrower wants to pay off the loan before the payoff date, the lender may charge a penalty. Borrowers should find out about any fees and penalties before deciding on a lender.

Interest Rates May Be Higher Than Other Options

For borrowers with poor credit, the interest rate on a personal loan can be high. In this case, a credit card might be a better option.

Where Can I Get a $15,000 Personal Loan?

Online lenders, traditional banks, and credit unions all provide $15,000 personal loans. Some online lenders pre-qualify borrowers so they can see the terms, and many will deposit funds into a bank account within one to two days.

Traditional banks or credit unions may offer better terms to their members because there is a pre-existing relationship. But they may also want to meet with a borrower in person to negotiate the loan.

How to Get a $15,000 Personal Loan

The steps to get approved for a personal loan are typically the same regardless of the lender. The first step, before you even apply, is to review your credit history. You can pull a report for free from each of the three major credit bureaus — Equifax, Experian, and TransUnion — from the website AnnualCreditReport.com. Then you can file a dispute online to have any inaccuracies removed. This can boost your credit rating and ensure you get the best terms from a lender.

Here are the basic application steps you’ll need to be prepared for:

1. Check Your Eligibility

Shop around for the best loan terms and find out if you qualify. Check both online lenders and traditional lenders, paying special attention to origination fees and prepayment penalties.

2. Get Pre-qualified

Getting pre-qualified will show you what terms the lender is offering based on your credit history. Fill out the online form, including how much you want to borrow and your desired payoff time frame.

Lenders will pull your credit report to pre-qualify you, which may ding your credit score. Focus on lenders who will perform a “soft inquiry” for pre-qualification, which will not affect your credit rating.

Recommended: What’s the Difference Between a Hard and Soft Credit Check?

3. Check the Terms

Once you are pre-qualified, review the pre-approval letter and check the loan amount. Check whether it is an unsecured or secured loan, the annual percentage rate (APR), and whether the interest rate is fixed or variable. Pay attention to the monthly payment and the payback term. Also look for fees, penalties, and other potential charges.

4. Apply for the Loan

Gather the documents that you will need to apply for the loan. Borrowers typically need to upload a pay stub, mortgage or rent agreement, debt documentation, proof of identity, and their social security number.

Applying for Other Small Loan Amounts

Loan amounts can range from $1,000 up to 100,000. The terms for a small $3,000 personal loan will vary with those for a larger loan. Here are some examples of loan interest rates, terms, and monthly payments.

$5,000 Personal Loans

Here’s a typical scenario for a borrower with average credit (700–759 credit score): The monthly payments on a $5,000 personal loan, paid back over five years at an APR of 15.75% to 18.25%, would be around $121–$128.

$10,000 Personal Loans

For a $10,000 personal loan paid back over five years at an APR of 12.75% to 15.25%, a borrower with average credit would pay $226 to $239 per month.

$20,000 Personal Loans

For a $20,000 loan paid back over five years at an APR of 12.75% to 15.25%, a borrower with average credit would pay $452 to $478 per month.

The Takeaway

Personal loan interest rates are determined by a borrower’s credit rating and financial history. The higher the credit rating, the lower the interest rate. For consumers with good credit, a $15,000 personal loan can be a more affordable form of debt than credit cards. For consumers with bad credit, the higher interest rate may make a $15,000 personal loan less attractive.

SoFi offers competitive personal loans. There are no origination, prepayment, or late fees as there are with some other lenders, and our competitive interest rates are fixed, making budgeting easier.

SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Online Personal Loan overall.

FAQ

What credit score is needed for a personal loan for $15,000?

A credit score of at least 660 is typically required for a $15,000 personal loan. Some lenders that cater to people with poor credit will charge higher interest rates and fees to cover their elevated risk.

How long can I get a $15,000 personal loan for?

Personal loans are typically for three, five, or seven years. The shorter the repayment period, the less interest you will pay over the life of the loan.

What would payments be on a $15,000 personal loan?

The monthly payments on a $15,000 loan depend on the interest rate and repayment terms. If you know how much you want to borrow, over what period, and at what interest rate, an online loan calculator can tell you what your payments will be.

---

Photo credit: iStock/fizkes

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOPL0322014

Read more

A personal loan is a type of loan offered by many banks, credit unions, and online lenders. Unlike a mortgage loan or car loan, which specifies what the money should be spent on, a personal loan doesn’t have as many restrictions. Typically, you can use the funds from a personal loan to pay for a wide range of expenses.

Various factors will influence which type of personal loan is right for you, like how much money you plan to borrow, your credit and income, and how much debt you already have. To make the best selection for your unique needs, however, it’s important to understand the different types of personal loans there are.

Unsecured or Secured

A common type of personal loan is an unsecured personal loan. This means there’s no collateral backing up the loan, which can make them riskier for lenders. Approval and interest rates for unsecured personal loans are generally based on a person’s income and credit score, but other factors may apply.

Unlike an unsecured loan, there is some sort of collateral backing up a secured personal loan. For example, think of a home mortgage — if the borrower does not make payments, the bank or lender can seize the asset (in this case, the home) that was used to secure the loan.

Since secured loans involve collateral, lenders often view them as less risky than their unsecured counterparts. This can mean that secured personal loans might offer a lower interest rate than a comparable unsecured loan.

Here’s a comparison of some of the features of unsecured and secured personal loans:

Unsecured Personal Loan	Secured Personal Loan
No collateral needed	Requires an asset to be used as collateral
Higher interest rates compared to secured personal loans	May have lower interest rates than unsecured personal loans
Approval based on applicant’s income, credit score, and other factors	Approval based on value of collateral being used, in addition to applicant’s creditworthiness
Funds may be available in as little as a few days	Processing time can be longer due to need for collateral valuation

Recommended: Choosing Between a Secured and Unsecured Personal Loan

Variable or Fixed Interest Rate

A personal loan with a fixed interest rate will have the same interest rate for the life of the loan. This also means you’ll have the same fixed payment each month and, based on your scheduled payments, can know upfront how much interest you’ll pay over the life of the loan.

On the other hand, the interest rate on a variable rate loan may change over the life of the loan, fluctuating based on the prevailing short-term interest rates. Typically, the starting interest rate on a variable rate loan will be lower than on a fixed rate loan, but the interest rate is likely to change as time passes. Variable rate loans are generally tied to well-known indexes.

If you’re trying to decide on a variable or fixed-rate personal loan, this summary might be helpful (you might also consider crunching the numbers using a personal loan calculator):

Variable Interest Rate	Fixed Interest Rate
May have lower starting interest rate than a fixed-rate personal loan	Interest rate remains the same for the life of the loan
Payment amount may vary from month to month	Monthly payment amount will not change
Might be desirable for a short-term loan if current interest rate is low	May be a better option if predictable payments are desired for a long-term loan
Maximum interest rate may be capped	Potential to cost more in interest payments over the life of the loan

Debt Consolidation Loan

This type of personal loan refinances existing debts into one new loan. Ideally, the interest rate on this new debt consolidation loan would be lower than the interest rate on the outstanding debt. This would allow you to spend less in interest over the life of the loan.

With a debt consolidation loan, you may only have to manage one single monthly payment. This streamlining of monthly debt payments is another major perk of this type of loan.

Cosigned Loan

If you’re struggling to get approved for a personal loan on your own, there are circumstances in which you can apply for a loan with a cosigner. A cosigner is someone who helps you qualify for the loan but does not have ownership over the loan. In the event that you are unable to make payments on the loan, your cosigner would be responsible.

Co-borrowers and co-applicants are other terms you might hear if you’re interested in borrowing a personal loan with the assistance of a friend or family member. A co-borrower essentially takes out the loan with you. Unlike a cosigner, your co-borrower’s name will also be on the loan, so they’d be equally responsible for making sure payments are made on time.

Meanwhile, a co-applicant is the person applying for a loan with you. When the loan application is approved, the co-applicant becomes the co-borrower.

Personal Lines of Credit

Slightly different from a personal loan, a personal line of credit functions similarly to a credit card. It’s revolving credit, which typically means there is a maximum credit limit, a required monthly minimum payment, and when the debt is paid off, money can be withdrawn again.

The funds in a personal line of credit are generally accessed by writing checks or using a card, or by making transfers into another account.

Interest rates on a personal line of credit may be lower than the interest rates on a credit card. Like personal loans, there are both unsecured and secured personal lines of credit.

Credit Card Cash Advances

Some credit cards offer the option to borrow cash against the card’s total cash advance limit. This is called a credit card cash advance. The available cash advance amount may be different than the total available credit for purchases — that information is typically included on each credit card statement.

Depending on the credit card company’s policy, there are a few ways to secure a cash advance: you can use your credit card at an ATM to withdraw money, borrow a cash advance from a credit union or bank, or request a cash advance from the credit card company directly.

Cash advances typically have some of the highest rates around. There are often additional credit card fees associated with a cash advance transaction. Check your credit card disclosure terms for full details before taking a cash advance.

Different Types of Personal Loan Uses

The common uses for personal loans are wide-ranging. Here are some of the reasons why people consider borrowing money with a personal loan.

Planning a Wedding

The dress, flowers, catering, photographer, venue fees — the list of wedding expenses can go on and on. A personal loan for weddings is one option that you can use to cover all or part of costs. Just keep in mind that this will involve going into debt, and you will pay interest.

Moving Expenses

Whether you’re moving across the country or just across town, the cost of moving can add up quickly. A personal loan could potentially help you make ends meet as you’re relocating.

And if you want to do a few renovations or upgrades on your new place once you’re moved in, a personal loan could help with that too.

Consolidating Debt

Another reason people use personal loans is to consolidate debt. Debt consolidation could allow you to simplify your repayment since you may have just one payment to keep track of every month after consolidating.

Depending on the rate and terms you qualify for, consolidating your debt could potentially help you save money on interest payments while you pay down your debt.

Taking a Vacation

Planning a vacation? Maybe your niece is getting married in Greece or you and your partner are planning a honeymoon. If budgeting and saving aren’t enough to get you to your vacation goal, a vacation loan could be one option to help you fill in the gaps. Just make sure you’re not taking on debt that you won’t later be able to pay back.

Making a Large Purchase

Whether it’s a new furnace, new patio furniture, or an engagement ring, if the cost of your dream item is a little out of your budget, a personal loan could help you afford the option you really want.

The Takeaway

Armed with some knowledge about types of personal loans, you may be ready to make an educated decision about whether or not a personal loan is right for you.

As you consider your options, take a look at SoFi. You can find out if you pre-qualify for a personal loan, and at what rates, in just a few minutes. Plus, as a SoFi member, you’ll be eligible for additional membership benefits like career coaching.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOPL0223010

Read more