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On the popular credit score spectrum of 300 to 850, where does a score start breaking bad? Different sources cite 670 or 630 or 600. But each lender makes its own determination of which credit scores are considered risky.

You usually need a credit score of at least 620 to get a conventional mortgage (one not backed by a government agency), but someone with a credit score as low as 500 to 580 may be able to qualify for an FHA or VA loan.

We’ll sort through the different credit score requirements, and the factors that might cause your score to drop, so you can work on building better financial habits.

Bad or Poor Credit Score Ranges

The most commonly used credit scores are calculated by FICO® and VantageScore®, and the two companies rank scores a little differently.

As you can see, a Poor credit score from FICO is not the same as that from VantageScore. FICO defines Poor as 579 or below (no one has a score below 300), whereas VantageScore’s Poor range tops out at 600.

To complicate matters, lenders may choose from multiple scoring models and industry-specific scoring models. This makes it tricky to know which one you’re being evaluated on. And your credit scores vary — yes, you have multiple scores.

A score in the 600s is typically high enough to qualify for some loans and credit cards. And generally, the best rates go to borrowers with scores in the mid-700s and above.

What’s the nationwide average? “Good.” As of this writing, Americans had an average FICO Score of 716 and a VantageScore of 698.

Recommended: How to Get Approved for a Personal Loan

What Determines Credit Scores?

A credit score is a number that summarizes your financial history in order to help lenders gauge the risk of extending credit. The higher your credit score, the more confident they are that you’ll repay your debt, and on time.

Your credit score is based on factors like how often you pay your bills on time, how many loans and credit cards you have, your debt relative to your credit limits, and the average age of your accounts. It also considers negative financial events such as judgments, collections actions, and bankruptcies.

Not all financial transactions get reported to the credit bureaus. Payday loans, a type of unsecured personal loan, are considered risky for consumers but don’t affect your credit score for better or worse.

Three major credit reporting agencies — TransUnion, Equifax, and Experian — compile the information on your history of borrowing, and then a company like FICO or VantageScore translates that data into a number.

Recommended: Secured vs Unsecured Personal Loans

Why Your Credit Score May Be Bad

If you’re worried about your credit score, it can help to understand what actions, or inaction, count against you. First there are the obvious slip-ups: missed payments, late payments, and defaulting on accounts. Applying for a lot of credit in a short time is also a red flag for lenders.

Other factors may not hurt your credit score, but they won’t help you build a solid credit history either. If they surprise you, you’re not alone.

•   You’re a recent grad. Although age cannot be used against you, younger people generally haven’t been financially independent long enough to have built up a significant financial history. “Credit age” accounts for about 15% of your score.

•   You rarely use credit cards. Paying through money-transfer apps (also known as peer-to-peer, or P2P, apps) is convenient, but using them doesn’t contribute to your credit history. “Credit mix,” or the different types of credit you use, makes up 10% of your score.

•   Your credit limit is low, and you spend almost the limit every month. You may think you’re living within your means, but lenders consider this a risky situation. “Credit utilization” accounts for a whopping 30% of your score.

How Bad Credit Can Affect You

Your credit score is just one factor that lenders consider when evaluating your application for things like a loan, but it carries a lot of weight. Your credit score not only affects your odds of approval for loans and credit cards, it plays a big role in determining the interest rates and repayment terms you’re offered.

Here are some of the things that take your credit history into consideration:

•   Credit cards

•   Car loans

•   Home loans

•   Personal loans

•   Private student loans

•   Federal PLUS loans

•   Car insurance premiums (in some states)

•   Homeowners insurance

In addition, your credit history may be weighed during a job or rental application.

Nonprime borrowers — generally defined as those with credit scores from 601 to 660, and who have negative items on their credit report — typically don’t get the lowest rates or most ideal terms when procuring a home or car loan.

For example, the interest rate on a subprime 30-year mortgage can be double or triple the average rate. A bigger down payment is usually required, and the repayment term may stretch to 40 or even 50 years, so the amount of interest paid over the life of the loan can be extraordinary.

Building Your Credit Responsibly

Millions of Americans have no credit score because they don’t have enough of a history to calculate one. If this is your situation, you have a couple of options. You may want to consider taking out a secured credit card that will allow you to access a modest line of credit by putting down a deposit.

You can also ask a friend or family member to add you as an authorized user to their credit card account. An authorized user can use the account but does not have any liability for the debt.

If you fall into the so-called bad credit score range, remember that it isn’t set in stone. There are steps you can take to help build your credit. It won’t happen overnight — any promise of a quick fix could be a scam.

But with a sustained effort, you may see a change in six months to a year, according to the Consumer Financial Protection Bureau (CFPB), a government agency. Here are some ideas to add to your Financial Adulting checklist.

Pay Bills on Time

An effective way to improve your creditworthiness in the eyes of lenders is to pay all your bills by the due date, every single time. If you have been late with any payments, consider getting caught up.

If you tend to forget bills, consider brushing up on how autopay works and set up payments through an app, an online bank account, or the entity billing you. Putting reminders on a paper or electronic calendar can help as well.

Pay Attention to Revolving Debt

Remember “credit utilization”? It’s generally a good idea to use no more than 30% of your total available credit. The CFPB says that paying off credit card balances in full each month helps to keep the ratio low and strengthen a credit score.

Credit utilization involves credit card and other revolving debts, not installment loans like mortgages or student loans.

Check Credit Reports and Scores

Between identity theft and plain human error, it’s worth reviewing your credit report for any unfamiliar charges or records, since the information in your credit report is used to generate your credit scores.

You can order a copy of your credit report from each of the three major reporting agencies for free at AnnualCreditReport.com. Look for mistakes in your contact details, accounts that don’t belong to you, incorrect reports of late payments, or accounts you closed being shown as open.

Credit reports do not show credit scores. How to get credit score updates then? A few options:

•   Buy your FICO Score from myfico.com.

•   Get your FICO Score for free from Experian.

•   Look for your scores on a loan or credit card statement.

•   Sign up for SoFi Relay, which provides weekly credit score updates and tracks all of your money in one place at no charge.

Closing and Opening Credit Cards Carefully

The average age of your accounts plays a role in your credit score, so you may want to keep some of your oldest cards open, even if you don’t use them often. Remember that closing cards also reduces your available credit, affecting your credit utilization ratio.

Opening cards affects your credit score as well. Every time you apply, the credit card company runs a hard inquiry on your credit, and your score takes a slight hit. Applying for a bunch of cards in quick succession can make it look like your financial situation has taken a turn for the worse.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

The Takeaway

A bad credit score is defined differently by individual lenders and credit bureaus. But a score in the 500s will make it difficult to qualify for a conventional mortgage, and can cost you money through higher interest rates. But with time and dedication, the tide can be turned.

If you’re struggling to reduce high-interest credit card balances or other debt, an unsecured personal loan may come in handy. SoFi fixed-rate personal loans can be used for almost any purpose.

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.

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

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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.

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 .

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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.

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.

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.

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.

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 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.

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.

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Most people could use a cash injection at some point in their lives. Perhaps they need to cover major home repairs, a big-ticket purchase, or emergency expenses. Whatever the reason, a personal loan may be a good idea, especially for borrowers with a strong credit history.

Read on to learn about $50,000 personal loans. Find out why they might be right for you (and when they may be wrong), how the terms are decided, and possible alternatives to a personal loan for $50K.

What Are Personal Loans?

Personal loans are a convenient way to fund a short-term cash flow problem or consolidate credit card debt. In many cases, once the loan is approved, the funds are deposited to your account within a day or two.

Banks, credit unions, or online lenders can all provide personal loans. The amount of a personal loan typically ranges from $1,000 to $100,000. Payback terms are flexible, running from 12 months to several years, and loan payments are due monthly. Personal loan rates vary depending on the credit score of the borrower: A higher credit score will be rewarded with better terms and a lower interest rate.

Despite their flexibility and convenience, there are pros and cons to personal loans that a borrower should be aware of before they opt for this financing option.

Recommended: How To Create a Personal Cash Flow Statement

Pros and Cons of Getting a $50,000 Personal Loan

One of the biggest advantages of an unsecured personal loan is that no collateral is required, which means you don’t risk losing your home or car. On the other hand, interest rates can be high if your credit score is low, and fees and penalties often apply.

Considerations When Looking for a $50,000 Personal Loan

Borrowers should pay special attention to these factors when comparing loans.

Types of Lenders

Three types of lenders offer personal loans: traditional banks, credit unions, and online lenders. Each lender will offer different loan terms, interest rates, and fees.

Online lenders will deliver funds faster, and they may offer lower rates because they have fewer overhead costs, such as physical branches to maintain. Banks and credit unions may offer discounts to their customers who hold checking or savings accounts.

Interest Rates

The biggest consideration for a $50,000 personal loan is the interest rate, because the rate and the length of the loan will determine the total cost of the loan. The shorter the loan, the less interest you will pay, and the lower the total cost.

In most cases personal loans have a fixed interest rate, but some do have variable rates. Variable rate loans often start out with a relatively low interest rate, but the rate can rise significantly later, increasing the monthly payments.

Fees

Origination fees can be hidden in the fine print, so make sure you understand how they impact the annual percentage rate (APR) that you are charged. Also check if there’s a prepayment penalty for paying off your loan early.

Total Repayment Cost

The total repayment cost of a $50,000 loan will depend on the interest rate and the length of the loan. You will make more payments over a longer term, racking up more interest and increasing the total cost of the loan. A shorter term will lower the total repayment cost. To minimize total repayment costs, select a loan with the biggest monthly payment you can comfortably afford and the shortest repayment term.

Monthly Payment Amount

The monthly payment is critical. If a monthly payment offered by a lender seems like a stretch, try to negotiate a longer repayment period. For instance, if a five-year loan is extended to a seven-year loan, you’ll make 84 smaller payments compared to 60 larger payments. Just remember, you’ll pay more interest over the life of the loan.

Credit Score

The minimum credit score to qualify for a $50,000 personal loan will depend on the lender. For such a significant loan amount, a traditional bank or credit union may require a credit score of 650 or more, which is considered a fair credit score. Other lenders may require a credit score of 600. Take steps to improve your score by removing any inaccuracies before you shop for a loan.

Recommended: What Is the Minimum Credit Score Needed To Get a Personal Loan

Debt to Income Ratio

A lender will consider your debt-to-income ratio when qualifying you for a personal loan. This ratio shows what proportion of your income is already used for existing debt, and whether you have enough income to pay the additional personal loan monthly payments. According to Investopedia, a debt-to-income ratio of around 36% or lower is desirable. A higher ratio may mean you’ll pay a higher interest rate.

Collateral

A personal loan is usually “unsecured,” which means that it doesn’t require collateral, such as your home, car, or savings account. If you have bad credit, however, the lender may ask you to provide collateral for a large loan.

Cosigner

One option for a borrower with bad credit is to apply with a cosigner that has good credit. This balances out the credit score calculation. The cosigner agrees to make the payments if you cannot.

How To Qualify for a $50,000 Personal Loan With Bad Credit

A $50,000 loan will be expensive if you have bad credit (read more on the bad credit score range). The best thing to do is to boost your credit score to at least 650. Check for any errors on your credit report, use credit cards sensibly, and pay bills on time.

It is possible to get $50,000 with a lower credit score, but you may have to resort to a secured loan, such as a home equity line of credit (HELOC), or find a cosigner.

Questions To Ask Yourself Before Taking Out a Large Personal Loan

A $50,000 personal loan is a huge financial commitment. Ask yourself the following questions before signing on the dotted line.

How Much Do I Really Need?

Minimizing your debt load means you pay less to lenders in fees and interest. Consider whether you can borrow money from another source at a lower cost and reduce the amount that you need from a personal loan.

Can You Afford the Monthly Payment?

If the monthly payment is going to take a big bite out of your paycheck each month, you may find yourself unable to meet the payments. Make sure your cash flow is sufficient to meet your monthly payments.

Is a Personal Loan Your Best Financing Option?

Look at other options before you settle on a $50,000 personal loan. If you have equity in your home, refinancing your mortgage or obtaining a HELOC might be a better choice. Credit cards and borrowing from family or friends are also good alternatives.

How Will the Loan Affect Your Credit?

When you are shopping for a loan, whether it be for $5,000, $10,000, or $100,000, a lender may pull a soft credit check to prequalify you. This will not affect your credit score. When you formally apply for your loan, the lender will do a hard credit check. This may reduce your credit score by around five points for one year.

Aside from credit checks, personal loans can help build your credit history or seriously hurt it, depending on how you manage your payments. If you make a payment that’s over 30 days late and it gets reported to the credit bureaus, it could lower your credit rating from excellent to fair. But if you use your loan to consolidate existing debt, your score might actually rise because your credit utilization ratio has improved.

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

Alternatives to $50,000 Personal Loans

As we already mentioned, two alternatives to a $50,000 personal loan are a home equity loan or a HELOC. A home equity loan uses your home’s equity as collateral. This type of loan may have longer repayment terms and lower interest rates than personal loans because your home is used as security. However, you risk losing your home if you can’t make the payments.

A HELOC is a revolving line of credit that you can draw from when you need to. It works like a credit card but uses your home as collateral. Again, you risk losing your home if you cannot make the payments.

The Takeaway

Personal loans for $50,000 are easy to find. Traditional banks, credit unions, and online lenders all provide flexible personal loans. The terms of a personal loan will depend on your credit score, and the higher your score the lower your interest rate.

An online lender can prequalify you and deliver funds in a day or two to your account. A bank or credit union may take longer, but they may also offer better terms to their customers. Borrowers should find out the average personal loan interest rate, shop around with different lenders, and look out for origination fees and prepayment penalties hidden in the small print.

Consider a personal loan with SoFi. SoFi personal loans have absolutely zero fees required. No prepayment fees. No late fees.

FAQ

What credit score do I need to get a $50,000 personal loan?

Most lenders will require a credit score of 650 or more, which is considered a fair credit score. Other lenders may require a credit score of 600, but they will charge higher fees and a higher interest rate.

How can you qualify for a $50,000 personal loan?

In general, to qualify for a $50,000 personal loan you will need to show you have sufficient income to make the monthly payments and have a credit score of 650 or higher. You also must be 18 years old and a U.S. citizen, legal resident, or visa holder.

Is it hard to get a 50k personal loan?

It is not difficult to get a $50K personal loan if you have good credit. If you have poor credit, the number of lenders available to you will be limited, and you will likely face higher interest rates and high fees, making the loan quite costly.

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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.

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.

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It’s not possible to take a loan from an IRA or Roth IRA. Making an early withdrawal from an IRA is an option, but that comes with taxes and penalties. You can borrow money from a 401(k) plan, however, without any penalties.

Read on to learn the impact of an early withdrawal from an IRA and some other ways to find the cash for unexpected expenses.

Can You Borrow from Your IRA?

An individual retirement account (IRA) is a savings account with tax advantages that is designed as a long-term investment vehicle for your retirement. The money that people invest in IRAs goes to a wide range of financial products, including stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Banks and investment companies rely on holding the funds for a long time, so lawmakers created strict rules around withdrawing money from traditional and Roth IRAs. There is usually a 10% penalty and an income tax bill.

IRA loans and Roth IRA loans are not allowed. You cannot borrow money from these accounts, but you can withdraw cash from your IRA if you have to, at a cost.

Recommended: What Is the Credit Score Required to Get a Personal Loan?

What Is Possible: Early IRA Withdrawals

Here’s what you can and can’t do regarding withdrawing cash from traditional and Roth IRAs.

Traditional IRAs

If you are 59 ½ or older, you can take money out of your traditional IRA with no penalty, but you’ll owe income taxes on the money you pull out.

Account holders of any age can withdraw funds from an IRA and roll them over into another IRA or redeposit them into the same IRA within 60 days. This amounts to a 60-day loan, and you can do this once every 12 months. If you don’t roll over the funds within 60 days, the action will be considered a withdrawal or lump-sum cash distribution. That means paying federal and state taxes plus an additional 10% federal tax fee.

There are some exceptions that will allow you to avoid the additional 10% federal tax:

•   First-time homebuyers can withdraw $10,000 for a downpayment.

•   The funds are used for higher education expenses.

•   The funds are used for the birth or adoption of a child.

•   You have become permanently disabled.

Recommended: Personal Loan Glossary

Roth IRAs

If you’re at least 59 ½ and you’ve owned your Roth IRA for five years or more, you can take tax- and penalty-free Roth withdrawals of contributions. However, if you withdraw earnings, such as dividends or interest, you might have to pay the 10% penalty and income and state tax on that portion of the withdrawal.

Drawbacks of Early IRA Withdrawals

Disadvantages of early IRA withdrawals are penalties and missed earnings on the money taken out.

Penalties

Before age 59 ½, you are subject to a 10% penalty on any amount withdrawn. The same penalty holds if you fail to redeposit a rollover within 60 days.

Taxes

Before age 59 ½, you are subject to federal and state taxes on early withdrawals.

Lack of Growth Potential

If you take funds out of your IRA, you will lose the earnings from that money that would otherwise go toward your retirement. In that sense, a $10,000 withdrawal could cost you much more than $10K in the long run.

Early IRA Withdrawal Alternatives

There are alternatives to withdrawing funds from an IRA. The best option for you depends on how much cash you need, the taxes and penalties you might pay, and the interest and fees you might pay on the alternative. Here’s a look at some of them.

401(k) Loan

Borrowing from your 401(k) is allowed. If your plan is amenable, you can take out as much as 50% of your savings, up to a maximum of $50,000, within 12 months. You will have to pay back the money, plus interest, within five years. However, the interest is paid back into your own account.

The advantage of a 401(k) loan is that there are no taxes or penalties. The disadvantage is that if you leave your current job, you may have to repay your loan in full. If you cannot, you’ll owe both taxes and a 10% penalty if you’re under 59 ½.

Family Loan

A family loan could be the best option if you can negotiate favorable terms. This route is also the most flexible but can affect family relationships if not handled well. Be sure to set expectations and draw up a contract to protect both parties.

Credit Card Cash Advance

A credit card cash advance is a quick way to get funds. No hard credit inquiry is needed, so there is no effect on your credit score. You can pay small fixed monthly payments, but there will be interest that accrues daily as well as fees.

The interest charges and fees will need to be weighed against the cost of an early withdrawal from an IRA. There may be a charge of up to 5% for a cash withdrawal. There may also be a flat charge for a withdrawal in addition to the percentage charge.

Depending on your credit line, the amount you can withdraw may be less than your credit limit.

Personal Loan

Most of the time, if you are looking for a specific sum of money that you would like to repay over time, a personal loan is a good choice. Current personal loan interest rates are generally much lower than for a cash advance.

Early IRA Withdrawal vs Personal Loan

Your decision may come down to an early IRA withdrawal versus a personal loan. Let’s look at the pros and cons of each.

Pros of Early IRA Withdrawal

•   If you have a Roth IRA, you can withdraw contributions (but not earnings) free of tax and penalties.

•   Early withdrawals provide emergency funds without interest and fees.

Cons of Early IRA Withdrawal

•   You cannot repay the money you withdraw, so you will have less of a nest egg for retirement.

•   If you withdraw gains from a Roth IRA, you may have to pay taxes and fees.

•   You miss out on earnings from the amount that you withdraw.

Pros of a Personal Loan

•   There are no withdrawal penalties with a personal loan.

•   Your retirement savings stay intact, and you will continue to earn money on the funds.

•   A personal loan can put cash into your bank account within one to two business days.

Cons of a Personal Loan

•   Some shopping around is required, and there is an application process.

•   A minimum credit score might be required.

•   Average interest rates and fees could be high depending on your credit score.

The Takeaway

Account holders may not take out loans from an IRA or Roth IRA. Making an early withdrawal from an IRA is an option, but that comes with taxes and a 10% penalty. Because you cannot pay the funds back, a withdrawal loses out on the investment gains those funds would have earned. However, you can withdraw money from your IRA as long as you redeposit it or roll it over into a new account within 60 days. And you can borrow money from a 401(k) plan without any penalties.

Before you consider withdrawing from your IRA, consider a personal loan. SoFi offers competitive personal loans with no origination, prepayment, or late fees. Getting a personal loan is usually straightforward, and funds can be deposited as soon as the same day.

FAQ

Can I take a loan from my IRA?

There is no such thing as an IRA loan because you cannot pay the money back. You can withdraw funds from an IRA and roll them over into the same or another IRA within 60 days, and you can do this once every 12 months. If you don’t roll over the funds within 60 days, the action will be considered a withdrawal or lump-sum cash distribution. That means you will have to pay federal and state taxes plus an additional 10% penalty.

How do I get an IRA loan?

You can’t borrow from your IRA. However, if you’re 59 ½ or older, you can request a distribution from your traditional IRA without any penalty. Since your original contributions were tax-deductible, you’ll need to pay income tax on the funds you withdraw.

If you have a Roth IRA, you can withdraw both contributions and earnings tax-free and penalty-free, but only if you are 59 ½ or older and have owned your Roth IRA for five years or more. If you withdraw earnings early, you’ll have to pay a 10% penalty and income tax on the amount you withdraw.

Lastly, you can use the 60-day rollover rule to your advantage if you can repay the borrowed money in 60 days or less and avoid paying taxes and penalties.

Photo credit: iStock/Geber86

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

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