To get approved for a $20,000 personal loan in Canada, you typically need to have a good to excellent credit score over 660. Keep reading to find out where you can apply for $20,000 loans, how to increase your chances of approval and how to find the best loan for you.
Get a $20,000 loan
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Where to get $20,000 loans in Canada
If you’re shopping for a $20,000 loan, the following types of lenders can help you. Keep in mind, they vary in their approach, product offerings, interest rates and application process.
Banks
Banks like Scotiabank, CIBC and TD only work with borrowers who have good to excellent credit scores, especially for a sizeable loan of $20,000. They offer competitive interest rates, but the application process is more involved and will require documents to show that you’re a responsible borrower. It can also take longer to get your hands on your funds. If you want to get a $20,000 loan from a bank, make sure your credit score is in great shape (at least 680) and that you’re staying on top of all of your debt repayments.
Credit unions
Your local credit union might offer loans of up to $20,000, and they often have competitive rates, too. However, you may need to be a member of the credit union to apply for a loan and you’ll also need a strong credit score.
Online lenders
Compared to banks and credit unions, online lenders are typically quicker to fund loans. You usually don’t need to submit as many documents, you can fill out the loan application in just minutes, and you can usually expect to receive your loan funds either the same day or the next business day. This group tends to be your best bet if you have bad credit, or no credit at all, as they offer bad credit personal loans. However, keep in mind that poor credit means more risk in a lender’s eyes, which means steeper interest rates. Compare online lenders now.
Peer-to-peer (P2P) platforms
Peer-to-peer platforms connect you to everyday Canadian investors who can lend you funds. The application process is similar to an online lender, but it can take longer to get your money since you’ll have to wait for investors to fund it. Also, peer-to-peer platforms may have tougher criteria to meet than online lenders.
Tips to get approved for a $20,000 loan
Lenders consider a $20,000 loan to be a pretty large amount for a personal loan, so you’ll need to have a solid financial profile. The following will increase your chances of approval:
Steady job. You’ll need to demonstrate consistent employment in the last few years. Make sure to list all your other incomes too, such as government benefits and rental income.
Low debt-to-income ratio (DTI). DTI is the percentage of your monthly debts out of your gross monthly income. A low DTI shows lenders there’s room in your monthly budget for a loan. Aim for a DTI under 40%, but the lower the DTI, the better.
Strong credit score. A credit score over 660-680 tells lenders you’re responsible with your debt and bill payments.
Collateral. Using an asset such as your car or house as collateral reduces the risk for the lender.
Cosigner. Lenders may be more willing to approve you if have a friend or family member with strong finances willing to sign the loan with you. If you fail to make payments, your cosigner will need to make them on your behalf.
Types of $20,000 loans
Here’s a look at your options to help you decide which type of $20,000 loan best suits your needs:
Secured loans. With secured loans, you use an asset you own, such as your house, as collateral. They often come with the lowest interest rates because offering collateral reduces risk for the lender. Major banks often offer secured loans to clients, especially if your loan is a larger sum like $20,000. Online lenders also offer secured loans.
Unsecured loans. Unsecured loans don’t require any form of collateral. They often come with steeper interest rates because lenders are taking on more risk.
Fixed-rate loans. Fixed-rate personal loans, as the name suggests, are personal loans with a fixed interest rate. You lock in the interest rate at the beginning of your loan term so your repayments stay the same throughout. Fixed-rate personal loans usually last from 1 to 5 years, with some extending up to 7 to 10 years.
Variable-rate loans. Variable-rate personal loans tend to come with lower interest rates than fixed-rate personal loans. The catch? Interest rates can fluctuate throughout the term of the loan based on market conditions. If your variable rate goes up, more of your payments will go towards paying interest. If your variable rate goes down, you’ll pay less interest, and more will go towards reducing the principal.
How much does a $20,000 loan cost?
There’s no way to say how much a $20,000 loan would cost for everyone, since loan terms can vary a lot from person to person depending on each applicants financial situation. In general, the cost of a $20,000 loan depends on two factors:
Your APR. Your loan’s APR is an expression of how you’ll pay in interest and fees over a year.
Your loan term. Your loan term is how much time you have to repay your loan, in months or years.
Loans with a longer loan term tend to have lower monthly payments. But they allow more time for interest to add up, increasing how much your loan costs in the long run.
What is the monthly payment on a $20,000 loan?
While the exact monthly payment you pay on a $20,000 loan will depend on the type of loan you get, its APR and the loan term, we can use an example loan to get an idea of how much the monthly payment would be. Let’s say you got a $20,000 loan on a 5-year term at 16.8% APR, here’s how much you would have to pay each month:
Monthly payment
Total amount repaid
Total interest paid
$494.90
$29,694.20
$9,694.20
Your goal is to commit to a repayment plan that fits your budget. You don’t want to overstretch your budget each month by dedicating too much of your income to repayments on a $20,000 loan. At the same time, you don’t want to choose repayments so low it will take you much longer to get out of debt than what’s necessary.
What is the interest rate on a $20,000 loan?
Considering that the average interest rate in Canada on a personal loan is 9.59%, you can expect an interest rate in that range. For good to excellent credit, the interest rate on a personal loan can range from around 6.99% to 20%. Bad credit borrowers looking for a $20,000 loan can expect interest rates ranging anywhere between 15% and 46.96%. For more information on average personal loan interest rates, check out our full guide here.
Personal loan calculator
Use our calculator to find out how much you might pay each month on a $20,000 loan at different rates and terms.
Calculate the cost of a loan
Fill in this calculator with information on any $20,000 loan to calculate the monthly and overall costs
Step 1: Research your lender options. There’s always the possibility of finding a provider close to home, so it may be worth checking with your bank or credit union. These types of lenders tend to offer the lowest interest rates. But you might also want to consider using the free services of online brokers like Loans Canada and LoanConnect. This way, you can shop around and compare rates and terms. Compare online brokers and lenders.
Step 2.Research the type of personal loan you want. Personal loans come in various forms, such as secured, unsecured, fixed rate and variable rate. These can all affect the cost of your loan.
Step 3: Keep your limits in mind. Take time to go over your income and expenses and find out just how much you can afford in loan repayments every month. From there, you can find several terms that could work within that limit.
Step 4: Know your credit score. Your credit score significantly affects your interest rate for most personal loans. Knowing your score can help you formulate an idea of what will be available before you shop around.
Step 5: Assemble your paperwork. Check what’s required by the lender beforehand. At a minimum, you’ll want to have copies of your employment income and government-issued ID like your driver’s licence or passport.
Step 6:Apply for the loan. Some lenders offer personal loan pre-approval, while others may take longer to offer the final approval decision.
Our 'promoted' products are presented as a result of a commercial advertising arrangement or to highlight a particular feature. Promoted products are not a recommendation, an indication a product is the best in its category, nor represent all products in the market. It is important to compare your options and find the right product for you.
What credit score is needed for a $20k loan?
To get a $20,000 loan with interest rates on the lower side, you’ll likely need a good to excellent credit score between 660 and 900. Banks like Scotiabank and CIBC offer personal loans worth $20,000, but typically only to borrowers with a high credit score and stable income. If you have a credit score lower than 660, you may still be able to qualify for a $20,000 loan from alternative, online lenders, but expect to pay higher interest rates.
Can I get a $20,000 loan with bad credit?
If you have bad credit under 600, getting approved for a $20,000 personal loan will be difficult. Online lenders are more likely to approve borrowers with bad credit than banks and credit unions, but $20,000 is a big ask, so before you apply, keep the following in mind:
Lenders will want to see that you have steady income to repay your loan. A stable employment history helps too.
Lenders will look at your existing debts. They’ll want to see how much you’re paying for in debt each month versus how much money you have coming in.
Lenders will also look at your credit history. A bad-credit borrower with a recent history of on-time payments has a higher chance of approval than a bad-credit borrower with no recent on-time payments.
If an online lender cannot approve you for a $20,000 loan, it may offer you smaller loan amounts based on its evaluation of your financial situation.
Every lender will have its own unique criteria, but generally, you need the following to qualify for a $20,000 loan:
Proof of a regular income, such as pay stubs and bank statements
Proof of identity, such as a copy of your driver’s licence or Canadian passport
An active bank account
A permanent address and contact phone number
Credit history, as most institutions will do a credit check before approving you
What to consider before applying for a $20,000 loan in Canada
Interest rates. Find out if you can get pre-approved for a personal loan so you’ll have a better idea of the rates you’re eligible for. Interest rates on personal loans can range from 6.99% to 46.96%.
Loan term. You’ll need to find a loan term that you can afford. Loan terms typically range from 3 months to 10 years. A longer loan term will give you lower monthly payments, but you’ll pay more interest over the life of the loan.
Additional fees. Ask about extra costs like NSF fees, late payment fees, prepayment fees, origination fees (a loan processing fee) and any others. NSF and late fees are more common than prepayment and origination fees.
Turnaround time. The time it takes to get your loan approved and for the funds to be deposited in your bank account will differ among lenders. Make sure the lender you apply with can get your loan to you when you need it.
Loan insurance. Lenders may offer you insurance to cover you loan repayments in the event of a death, job loss or illness. But lenders should never require or push you to get insurance. Loan insurance adds to the cost of your loan.
Upfront fees. Legitimate lenders will not ask you to pay any fees upfront, so be sure to avoid lenders that do.
No pressure. Avoid lenders that pressure you into signing a contract. Do not rush into an agreement without understanding the terms of your loan, including the APR, repayment schedule and how much interest and fees you’ll pay overall.
Alternatives to $20,000 personal loans in Canada
While getting a personal loan is a very common way to obtain a $20,000 loan, there are a few other options worth considering.
Depending on how you want to use your $20,000 loan, a line of credit may be a better option than a personal loan. While a personal loan gives you one lump sum, a line of credit is an open-ended loan where you can borrow and pay back continually up to a set amount (in this case $20,000).
A personal loan may be a good idea if you have a one-time use in mind for the money. But if you want the flexibility to use however much you need of the loan at different times, getting a $20,000 line of credit may be the way to go. Read our full guide to comparing personal loans vs. lines of credit to learn more.
If you have a equity built up in your home, you may be able to score better interest rates by opting for a home equity secured line of credit (HELOC). By securing the $20,000 loan with your home, lenders take on less risk, which means they can offer you lower rates. HELOCs are especially suited to help people with low credit scores get access to lower interest rates than they otherwise could have.
Bottom line
Comparing multiple lenders can be a time-consuming process. To make your decision easier, we’ve narrowed down the list for you to several legit online lenders offering competitive $20,000 personal loans. Or check out our personal loans guide to learn more about your options in general.
When comparing loans, don’t be afraid to ask questions or turn down your first offer if it’s not at the rate and terms you expect.
How long it takes to pay off a $20,000 loan will depend entirely on the loan term you sign up for. Typical $20,000 loan terms can range from 3-120 months. Remember that the longer your loan term is, the more you'll pay towards interest over the life of your loan.
Outside of the interest rate, you'll want to look for processing fees, origination fees, prepayment penalties, late payment fees and non-sufficient funds fees. The first two may be negotiable if you ask.
More often than not, personal loans can be used for any legitimate purpose. Our research found that 41.3% of Canadians took out personal loans to buy a car, 19.5% to finance a mortgage, 15.8% to consolidate debt and 13.2% to finance home renovations. If you're unsure what you can use your loan for, you can contact the lender's customer service via phone, email or live chat to clarify.
Here is a list of things that people tend to use personal loans for:
Home improvement
Dental bills
Vacation
Debt consolidation
Buying a car
Wedding
Pet care
Education
Boat or jet ski
Going green
Absolutely. Say you get a $20,000 loan to do some home renovations. You decide to renovate a little less than you originally planned, so you come in under budget. If you didn't want to pay back the loan with the remaining amount, you could easily use it to reward yourself for your hard work and go on a vacation instead.
This depends on whether you choose a fixed or variable rate for your $20,000 loan. A fixed rate is one that's locked in for the life of the loan. On the other hand, a variable-rate loan changes over time, usually limited to a predetermined range. Before you agree to a variable rate, make sure you can afford the most expensive rate's repayments.
Leanne Escobal is a publisher for Finder. She has over 11 years of experience in financial services, specializing in content and marketing. Leanne has completed the Canadian securities course (CSC®) as well as the personal lending and mortgages course by the Canadian Securities Institute. She has a Bachelor of Arts (Honours) in English literature and creative writing from Western University.
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