Get a personal loan in your 20s: What you need to know |
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Getting a personal loan in your 20s: What you need to know

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Weigh the pros and cons of borrowing while you’re still learning to adult.

A good bit of your 20s are spent learning to take care of yourself in the real world. You might have taken on a full-time job, joined the gig economy, hustled your way through graduate school — or some combination of the three.

A personal loan can help when you’re just starting to build a solid financial future. But don’t be too quick to sign on the dotted line.

Credible Personal Loans

Our top pick: Credible

Quickly get personal loan offers from top online lenders.

  • Minimum Loan Amount: $1,000
  • Maximum Loan Amount: $100,000
  • Loan Terms: 2–7 years
  • One simple form
  • Must have good to excellent credit

    How 20-somethings can benefit from a personal loan

    A personal loan can help you pay down debt and invest in yourself when you’re just starting out. The extra cash could remove barriers to an exciting career opportunity, returning to school and other life milestones.

    Making a big move

    You’ve landed a great job offer, but it’s all the way on the opposite coast. Maybe you’ve fallen in love with someone who lives a thousand miles away, or just want to see a new part of the world.

    When moving your life in a new direction across the country or across the ocean, a personal loan can help you cover the upfront costs of flights, moving trucks, gas, deposits and more.

    • Tip: Apply for a loan while you’re employed. Some lenders will consider your application if you’ve recently started a job. But you’ll likely find it hard to qualify for a competitive —or any — rate if you’re unemployed.

    Starting a business

    You might have a successful side hustle you’re looking to expand or a killer idea you’re willing to personally invest in. While some lenders offer startup financing, a personal loan could be a competitive option if you have strong personal credit and enough income to cover personal costs while getting your new enterprise off the ground.

    • Tip: Find an entrepreneur-friendly lender. Online lenders like SoFi offer special programs for entrepreneurs, while others provide hardship forbearance you can rely on if your business folds. That way, your personal credit isn’t as deeply affected if things don’t go as planned.

    Consolidating debt

    If credit card debt is weighing you down, consider applying for a debt consolidation loan. Consolidation moves your existing debt into a term loan, ideally at more favorable rates. It can provide a path out of credit card debt and help you save over the long term if you’re extended a low APR.

    • Tip: Watch for the origination fee. Many personal loan providers charge a processing fee equal to 0.5% to 6% of your loan amount, which many lenders subtract from your funds. If you see such a fee, ask how it works — you might need to take out a larger loan than you intended to pay off your debt in full.

    Paying for school

    Medical students, lawyers and anyone else who’s maxed out student loans might want to consider a personal loan to cover their costs. Personal loans can also help you pay for a bar exam or relocate for a medical residency if you can’t find a private student loan.

    Student loans often come with competitive rates and in-school deferment options that you just won’t find with personal loans, however. While it might keep you from dropping out, a personal loan should be a last resort.

    • Tip: Look for a lender that accepts cosigners. Unless you’re employed full time while in school, you might not qualify for a personal loan on your own. Applying with a trusted cosigner can help you land more competitive rates than applying on your own.

    Building credit

    Your credit score matters more than you might think. Yes, you need good credit to get a good deal on a credit card or mortgage. But some employers — and even landlords — look at your credit score when you apply for a job or an apartment.

    If you’ve never carried debt, consider a credit-builder loan. Offered by many local banks and credit unions, these loans don’t typically allow you to access the funds until you’ve paid off the loan.

    Already have a credit history but want to improve it? Taking out a personal loan can help improve your credit with responsible, on-time payments.

    • Tip: Know how much you can afford to borrow. Taking out a loan you can’t afford can hurt your credit, because on-time payments make up a large part of your credit score. Use our personal loan calculator to estimate how much you can afford to borrow.

    Compare personal loan providers

    Rates last updated October 22nd, 2018

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    4.99%–36% (fixed)
    Upgrade Personal Loans*
    Affordable loans with two simple repayment terms and no prepayment penalties.
    6.99% to 35.97% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    3.09%–35.99% (fixed)
    Marcus by Goldman Sachs Personal Loans
    Consolidate your debt or pay off large expenses with competitive rates and no fees.
    Good to excellent credit
    6.99% to 24.99% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    4.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    6.16% to 35.89% (fixed)
    Conveniently check your loan options without affecting your credit score.
    9.95%–35.99% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    6.99% to 14.87% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    16.05%–35.99%* (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    34%–155% (Varies by state) (fixed)
    CashUSA Installment Loans
    A connection service for quick cash loans up to $10,000.
    Bad credit OK
    5.99%–35.99% (fixed)

    Compare up to 4 providers

    When to avoid taking out a loan

    A personal loan may not be the best idea for all situations. Before signing a contract, look into alternatives that can help you meet your financial goals.

    Recurring bills

    In an emergency, a personal loan can help you cover the cost of monthly bills. But you could end up in more debt than you can handle if you continually rely on loans to cover your general living expenses. Consider making a budget to cut back on personal spending, crowdfunding for help or reaching out to your support systems — friends, family or even benefits programs — before you borrow.


    Traveling can be a life-changing experience. But taking out a loan might not be the best way to see the world in your 20s. If you’re bitten by the travel bug, consider work-away programs, travel deals from companies like Groupon or good old-fashioned saving.

    Unnecessary big purchases

    That $5,000 rug might tie the room together, but digging into debt for unnecessary items puts you at financial risk. That’s because you’re paying interest on an already expensive item, costing you more in the long run. Unless it’s something you absolutely need, consider saving up for it instead.

    Watch out for high rates and fees

    Not all 20-somethings have poor credit, but chances are good that you won’t qualify for the strong rates and generous terms you might get on a loan 10 years down the line.

    A few reasons for less competitive loans:

    • You’ve had less time to build a credit history. The length of your credit history counts toward your credit score. Generally, the longer you’ve been paying off debt, the higher your score. It’s also a factor that some lenders consider when you take out a loan.
    • Your high debt-to-income ratio. If you have massive student loan payments compared to your salary, you could have trouble qualifying for a loan. Most lenders prefer a debt-to-income ratio of 43% or less.
    • You’re new to the job market. Many lenders require a minimum income and prefer applicants who are employed full time. While it’s possible to get a loan while self-employed or freelancing, it may not be easy to prove that your income is what you say it is. A higher income can typically get you larger loan amounts and more favorable rates and terms.

    3 tips for managing your personal finances in your 20s

    1. Start saving now. Experts say you should have saved for retirement at least one year’s salary by the time you’re 30. But that’s not the only cost to save for — you never know when you might have an emergency expense.
    2. Pay attention to your credit. Tracking your score can help you build the credit you need to, say, buy a car or invest in a home. Many budgeting apps offer free credit score tracking that updates every month.
    3. Refinance your loans. Federal student loans often come with unbeatable rates and terms. But you might find a better deal out there for private student, personal or car loans. Especially if you’ve paid off a debt, earn more or have a better credit score than when you first took out the loan.

    Bottom line

    A personal loan can help you lay down the groundwork for building a strong and happy future — like moving to a new city to start a dream job. But borrowing more than you can handle could seriously hurt your personal finances and limit your future options.

    Learn more in our guide to personal loans to know how to weigh benefits and find a lender.

    Frequently asked questions

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    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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    US Personal Loans Offers

    Important Information*
    Even Financial Personal Loans

    Get connected to competitive loan offers instantly from top online consumer lenders.

    Prosper Personal Loans

    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

    LendingClub Personal Loan

    A peer-to-peer lender offering fair rates based on your credit score.

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

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