I'm not sure how password hashing works (will be implementing it later), but need to create database schema now.
I'm thinking of limiting passwords to 4-20 characters, but as I understand after encrypting hash string will be of different length.
So, how to store these passwords in the database?
As a fixed length string (VARCHAR(n) or however MySQL calls it). A hash has always a fixed length of for example 12 characters (depending on the hash algorithm you use). So a 20 char password would be reduced to a 12 char hash, and a 4 char password would also yield a 12 char hash.
It really depends on the hashing algorithm you're using. The length of the password has little to do with the length of the hash, if I remember correctly. Look up the specs on the hashing algorithm you are using, run a few tests, and truncate just above that.