There are lots of reasons to get a $40,000 personal loan — from refinancing credit card debt to paying for your wedding. And there are a variety of lenders who will lend you the money you need. Researching different types of lenders and shopping around for loans will help you find the best rates.

Getting a loan isn’t the only way to pay for big expenses, though. If you can find another way to finance your big expenses, you will save money in the long run. Whatever you decide to do, make a plan and understand the long-term cost of a loan this size before you make a final decision.

How to determine if you need a $40,000 loan

Taking out a loan of this size can significantly affect your finances, and $40,000 is a large amount to borrow. Whether you need funds for your wedding or have to pay for college, it’s a good idea to understand the long-term responsibilities of taking out a loan of any size.

If you can find funds for your need in another way, it’s typically better to avoid paying interest on a loan. Additionally, if you can wait until you can save $40,000, that is also a good idea.

There are some cases where taking out a personal loan might be helpful. Here’s a few ways a loan like this can be good:

  • Consistent and timely payments can bring up your credit score. If you want to increase your credit score, you can make reliable monthly payments on your loan.
  • Investing in some things means a higher payout in the future. Doing home renovations or going to college costs a significant amount of money upfront, but they can lead to more money in the future with a higher paying job or more home equity.
  • It’s necessary for you to live your life. If you need a car to go to work or get around, you might just need to take out a car loan. Just make sure, you aren’t paying for more vehicle than you can afford.

If you decide to take out a personal loan, make sure you know how much you will owe each month and have a plan to pay it back. It can be dangerous to take out a loan if you don’t have the income to pay the monthly payments.

Requirements to receive a personal loan

Not everybody is eligible to apply for a personal loan. There are certain requirements you must meet to qualify. Banks and other lenders typically have certain factors they use to determine whether you are a good candidate for a personal loan.

First of all, you need to have good credit. Your credit score shows how well you have made payments in the past. Lenders often require at least fair credit (580-669), and having good credit (670 and higher) will help you get the best rates and terms on a loan. However, every lender is different. For example, Happy Money requires a credit score of at least 640 to give you a loan.

The other main factor a lender considers when you apply for a loan is your debt-to-income (DTI) ratio. This is exactly what it sounds like — your DTI is your total monthly debt divided by your total monthly income. Typically, the lower your DTI the better. A DTI of 36 percent or lower is the standard lenders usually require for loans.

Lenders will also require that you provide documentation to verify all of the information you give them. When you apply, expect to provide pay stubs, address verification documents, and proof of identity. Also, every lender has different requirements, so there may be additional factors they consider when you apply for a personal loan.

Personal loan lenders that offer $40,000 loans

When shopping for a personal loan, it’s important to talk to different lenders. And you should talk to lenders of different types. Credit unions, local banks, online lenders and peer-to-peer lenders offer a variety of options. Exploring loans from multiple lenders will help you find the best deal.

Here are a few top options to consider:

APR range Loan amount range Minimum credit score requirement
Prosper 7.99-35.99% $2,000-$50,000 560
LightStream 5.73% $5,000-$100,000 Not disclosed
Happy Money 5.9-24.99% $5,000-$40,000 640
SoFi 7.99-23.43% $5,000-$100,000 Not disclosed

Prosper

As a peer-to-peer lender, Prosper works a little bit differently than other lenders. Funds come from “peers”, or other individuals and they decide if they want to lend you money.

The application process remains similar to traditional online lenders, though. You fill out an application online and often get funds within one business day, if you qualify. And, you can fill out a quick form on their website to find out your rates for a personal loan without impacting your credit score.

LightStream

Want to get the best rate as reward for your good money habits? LightStream aims to do just that by calculating better rates for those with a healthy credit history and liquid assets that demonstrate an ability to save.

LightStream also offers a 0.50 percent rate discount for loan holders that use autopay to make their monthly payments. And you can conveniently monitor your loan and payment progress by downloading their app.

Happy Money

Happy Money has options for multiple types of personal loans. Their goal is to help customers use money as a tool for happiness. One of their loan options, The Payoff Loan, is designed specifically to help you pay down your credit card debt in a simple way.

Just like many other lenders, Happy Money lets you check your rates for free by answering a few questions on their website. This rate check won’t affect your credit score either.

SoFi

Are you a U.S. citizen looking to refinance your student debt? SoFi could be the right lender for you. Focused on helping those who have higher education degrees repay their debt quicker. SoFi makes applying for a personal loan easy.

They also have personal loans to help pay for home improvements, credit card debt consolidation, family planning, travel and weddings. Whatever type of personal loan you need, you can check your rate on their website.

Costs of a $40,000 personal loan in the long term

When you take out a personal loan, you not only have to pay the amount borrowed back to the lender, you also have to pay interest on the amount of the loan you have left to pay. Interest rates vary greatly and can be impacted by your credit score, and the type of loan you get. You will be responsible for paying it all back by making a specified monthly payment to your lender.

Here’s an example of how much interest you may have to pay. Let’s say you take out a $40,000 loan with a three year term and an annual percentage rate (APR) of four percent. You would have to pay a monthly payment of $1,180.96 and you would pay a total of $2,514.54 in interest over the life of the loan.

It’s important to understand the total amount your loan will cost you over time, and to know the amount for the monthly payments you will need to make. Using a loan calculator as you shop for loans can help you get an idea of the cost of different types of loans.

Bottom line

You have a lot of options when looking for a personal loan. It’s important that you understand the requirements and costs of a $40,000 loan, though. Take time to explore different lenders and calculate the total cost of interest for any loan you consider.

If you can save up money or find an alternative way to fund your expenses, you can avoid having to pay interest on a large loan. Whatever you do, don’t make any quick decisions. Know how much you will be responsible for monthly with a loan, and make a plan to stay on top of your payments.