Whether you want to use your $40,000 personal loan to repay debt or fund a trip, it’s important to evaluate your eligibility for a loan and understand the loan application process.
There are several steps to get a personal loan, starting with pre-qualification and ending with your application. During pre-qualification, you’ll receive an estimate of the loan amount and terms that are available to you. Generally, lenders look at your credit score and financial history to assess your capacity to repay a loan. If these factors are insufficient, a lender may not be willing to give you a $40,000 personal loan.
If you aren’t sure if you need a $40,000 personal loan, we recommend reviewing the following guide to decide if it’s the right option for you.
Pros & Cons of a $40,000 Personal Loan
While personal loans can provide funds quickly, they have advantages and disadvantages. By understanding both, you’ll be able to decide if taking out a $40,000 personal loan is the best option for you.
Advantages of $40,000 Personal Loans
Disadvantages of $40,000 Personal Loans
RED FLAGS TO AVOID
When applying for a personal loan, it’s important that borrowers be mindful of scams. To avoid falling victim to a predatory lender, you should look out for the following in your lender of choice:
- They boast a high acceptance rate regardless of your credit score or financial history
- They do not provide an approximate interest rate before you apply
- They have steep pre-payment penalties
- Their marketing tactics are aggressive
- The process is fee-intensive
- They offer to fix future problems through refinancing
$40,000 Personal Loan Lenders
Several lenders offer personal loans for $40,000, but each lender has a slightly different set of borrower requirements. By comparing lenders, you can find the best one for your situation.
ONLINE LENDERS
Most lenders do not have a physical location, so the entire application process is conducted online. Some online lenders have non-traditional requirements and may approve your application without the standard documents required by a bank. However, it’s still advised that you’re prepared to provide typical documents, like your credit history, proof of identification and proof of income. Compared to traditional lenders, online lenders may have fewer credit score requirements and offer smaller loan amounts.
When choosing an online lender, it’s important to review their loan terms and requirements. Sometimes, their websites also include reviews from current or former borrowers. Reviewing these can give you an idea of what to expect, in terms of service quality and customer support, from a lender.
BANKS
Banks are the most traditional provider of personal loans. Their underwriting process relies heavily on your credit history, so if you have a poor credit score (FICO score of 300 - 579), you may want to consider another lending option. Banks also usually complete a hard inquiry of your credit report, which can temporarily lower your credit score. Furthermore, they typically require that you provide proof of identification, income and employment.
To find the right bank for your needs, you should look for lenders who offer pre-qualification. That way, you can estimate your loan’s interest rate without your credit score being impacted. Similarly to online lenders, you can read a bank’s reviews to see if other borrowers are satisfied.
CREDIT UNIONS
A credit union is a nonprofit organization that offers more flexible personal loans than banks in terms of requirements, rates and loan terms. To access these, however, you will need to be a member of the credit union.
When looking for the best credit union, consider its services, perks and online banking capabilities. In comparison to banks, credit unions usually provide fewer financial services and benefits.
INFORMATION NEEDED WHEN APPLYING FOR A LOAN
It’s important to gather the following information and required documents before you apply for a personal loan:
- Proof of identification, such as a driver's license or passport
- Proof of income, like W-2 statements and tax returns
- Your employer's information, such as the company name, your manager's name and their phone number
- Proof of residency, such as a utility bill or lease agreement
How to Apply for a $40,000 Personal Loan
If you’re confident that a $40,000 personal loan is the best financial decision for you, you should take the following steps to apply:
1
Check your credit score
Your credit score is one of the most important factors determining your eligibility for a $40,000 personal loan. If your credit score is low (FICO score of 300 - 579) and you aren’t actively working to improve it, you may want to reconsider obtaining a personal loan. Even if you qualify, you’ll likely receive a steep interest rate.
2
Get pre-qualified
Pre-qualifying for a loan is a great way to find out your potential loan terms with a given lender without impacting your credit score. The pre-qualification process can usually help you determine what rates and terms you’ll receive based on your credit score, financial situation and funding needs.
3
Compare quotes
Since every provider has different loan terms and borrower requirements, you need to consider several factors. These include the lender’s offered annual percentage rate (APR), repayment period, monthly payments and qualification requirements. By comparing different lenders, you’ll be able to find the one that best meets your needs.
4
Choose a loan offer
Once you’ve thoroughly researched and compared different lenders, it’s time to choose the lender that’s most ideal for your situation.
5
Submit application
Depending on your chosen lender, you may be able to apply online, in person or over the phone. Before you apply, ensure that you’ve gathered all pertinent documents to expedite the application and approval process. Be mindful that you’ve fully completed your application before submitting it; failure to provide all requested information could cause your application to be rejected.
6
Receive and use funds
Once your application is approved and you accept the loan terms, it can take anywhere from one day to a week to receive funds. Some lenders offer same-day funding, so you may have access to your personal loan even sooner.
Frequently Asked Questions About $40,000 Personal Loans
Deciding whether to take out a $40,000 personal loan can be difficult. To help make your decision easier, MoneyGeek answered some of the most frequently asked questions about the loan application process.
It depends on your financial situation. If you have a relatively high credit score (FICO score of 740 and above), it may be easier to obtain a $40,000 personal loan. Conversely, if your credit score is low (FICO score of 300 to 579) or your credit history is insufficient, you may have trouble getting approved.
Credit score requirements vary by lender. You should compare lenders’ borrower requirements to find one whose eligibility criteria you meet.
It’s only wise to take out a $40,000 personal loan or any line of credit if you can afford to repay it. If your credit score is not ideal, avoid putting your credit score at risk and find an alternative way to fund your expenses.
A $40,000 personal loan can be obtained through some online lenders on the same day that you’re approved or within a few business days. It may take longer with traditional banks or credit unions.
Generally, yes. However, it will depend on your credit score and your chosen lender. It’s also worth noting that taking out new lines of credit may affect your credit score.
In order to avoid taking out a personal loan, you may want to look into a credit card with a high limit or a home equity line of credit. Borrowing from friends and family may also be an option, depending on your situation.
