Considering a $25,000 Personal Loan? Here’s Everything You Need To Know

From debt consolidation to making home improvements to paying for emergency expenses, there’s no shortage of reasons why you might need $25,000. It’s not a small amount of money, and many people don’t have the luxury of turning to friends or family members for that type of loan.

A personal loan will be one of the fastest and easiest ways to collect $25,000. Let’s explore the requirements, how to get a $25,000 loan, what your monthly payment might look like and some alternative options for coming up with this amount of cash.

Regardless of the lender you choose, you’ll need to meet some basic requirements to qualify for a $25,000 loan. Two of the biggest are as follows:

• Credit score: The exact minimum credit score you need will depend on the lender and their holistic review of your application. That said, most lenders have a minimum credit score requirement in the mid-600s for an unsecured personal loan – which is the most common type of personal loan, as opposed to a secured personal loan. Unlike an unsecured personal loan, a secured personal requires the borrower to offer the lender some form of collateral.
• Debt-to-income ratio (DTI): Generally, the lower your DTI, the more confident a lender will be in your ability to take on debt and repay it on time. While exact thresholds vary, lenders typically allow for a DTI in the 36% – 50% range. Anything below 36% is even better. DTI is always expressed as a percentage, and it’s the sum of your monthly debt payments divided by your monthly gross income.

Your lender will also review other aspects of your financial situation, including your annual income and your payment history. However, those elements are usually reflected in your credit score and DTI.

Applying for a personal loan is a straightforward and relatively fast process. Some lenders can even transfer the funds to you the same day your application is approved. Here’s how to go about it.

1. Review Your Finances

Start by checking your credit score and calculating your DTI. The stronger your scores here, the better the repayment term and interest rate you may qualify for, and the better your general odds of loan approval will be.

Reviewing your information before applying can also tell you if you’d be better off focusing your energy on improving your credit score and DTI instead of seeking loan approval at this time.

2. Research Lenders

If you’re comfortable with your financial health, the next step is to begin researching lenders. Numerous lenders might be willing to approve you for a $25,000 loan. Rocket Loans^SM offers personal loans at this amount for those who qualify.

When comparing lenders, don’t just look at interest rates. Remember to compare their annual percentage rates (APR). The APR factors in lender fees to give you a more complete picture of the borrowing cost. You should also check out different lenders’ customer reviews.

3. Apply For The Loan

Once you’ve decided on a lender, go ahead and fill out an application for the loan. The process is usually straightforward and can often be completed online.

You’ll need to provide sensitive personal and financial information such as:

• Social Security number
• W-2s
• Tax returns
• Pay stubs

Make sure your lender uses a secure portal and that you don’t do this over public Wi-Fi. If your lender asks for additional information or documentation, try to provide it as quickly as possible to avoid processing delays.

4. Wait For Approval

There’s not much for you to do while the lender reviews your application. The good news is that the process is usually fast, often taking only 1 – 3 business days.

Rocket Loans offers same-day funding, meaning you could receive your money the same day you’re approved.¹

5. Review The Conditions Of The Loan

Once you’re approved for the loan, you’ll receive a promissory note. This is a document that outlines the terms and conditions of your loan and your repayment plan. It should include information such as the principal loan amount, the interest rate and the repayment timeline.

Review all the information carefully and ask your lender any questions you might have. Once you sign this document, the funds will be transferred to you, and you’ll be responsible for paying the loan back over an agreed-upon period.

6. Make Your Monthly Payments

Once you’ve accepted the conditions of the loan, the funds will be transferred to you in a lump sum. After receiving the money, you’re free to spend it as you please. Just don’t forget to make your monthly payments.

Your exact monthly payment will depend on various factors, including the lender you choose and your application. For example, if you have a strong credit score, you’ll qualify for better loan conditions that will translate into a lower monthly payment.

That said, here’s a table showing what your monthly payment on a $25,000 personal loan would look like with different repayment timelines and interest rates.

While a personal loan will likely be your fastest option, it’s possible to use another avenue to get a loan for $25,000.

Home Equity Loan

Home equity loans allow you to take advantage of your equity. However, there’s no draw period. You receive the loan in a lump sum and are responsible for paying closing costs. Our friends at Rocket Mortgage^® offer a Home Equity Loan option.

Home Equity Line Of Credit

A home equity line of credit (HELOC) allows you to tap into the equity you’ve built up in your home. HELOCs have what’s known as a draw period where you can take out as much as you wish as often as you wish – up to the limit set by your lender. Once the draw period ends, the repayment period will begin.

Repayment timelines are usually longer than they are for personal loans, and depending on your equity, you may be able to take out a larger sum than with a personal loan.

Cash-Out Refinance

HELOCs and home equity loans are both considered a type of second mortgage. Instead of going this route, you have the option to access the equity in your home by replacing your current mortgage with a new one. This process is called a cash-out refinance.

With a cash-out refinance, you receive the funds from refinancing in a lump sum and still only have one mortgage payment to manage.

401(k) Loan

If you have a 401(k) retirement plan, you may be able to borrow against it with a 401(k) loan. One of the benefits is that you’ll pay yourself back over time, with interest. The funds go back into your account. Depending on the specifics of the plan, you can take out up to 50% of your savings up to $50,000 within a 12-month period. This is different than a 401(k) withdrawal, which could result in massive taxes and fees.

If your credit score is in the fair range (580 – 699), you might still qualify for the loan. It really depends on where you fall in that range and the individual lender’s requirements.

If you do qualify, you’ll be subjected to a higher interest rate than you would enjoy with a better credit score. If your credit score is poor (579 and under), it may be very hard to qualify for a $25,000 personal loan at all.

If you make on time, consistent monthly payments, taking out a $25,000 loan could boost your credit score in the long run. However, in the short term, it will likely hurt your credit because you’re increasing your debt load, and the lender conducts a hard inquiry to check your credit that temporarily lowers your credit score by a few points.

If you meet the minimum requirements for a $25,000 loan, you can get one very quickly. That said, you could be repaying the loan for a few years, so take the time to research lenders and find the best deal. Also, make sure you plan to spend the money in a way that will benefit you over the long haul.

Interested in applying for a $25,000 personal loan with Rocket Loans? Get started now and see how much you prequalify for.

¹Same-day funding is available for clients completing the loan process and signing the Promissory Note by 1:00 p.m. ET on a business day. Also note, the ACH credit will be submitted to your bank the same business day. This may result in same-day funding, but results may vary, and your bank may have rules that limit our ability to credit your account. We are not responsible for delays that may occur due to an incorrect routing number, an incorrect account number or errors of your financial institution.