Small personal loans can provide the funding you need to pay for incidentals like car repairs, medical bills, replacement appliances and other unexpected expenses. You may also use a personal loan to pay off a small amount of credit card debt at a lower fixed interest rate.
However, many lenders have minimum borrowing amounts of at least $2,000, which means you may have to do some research to find a small loan that doesn’t require you to take out more debt than you need. Here’s what you should know about finding the right loan for your circumstances and what to consider before applying, as well as alternative ways to cover a small expense.
— Where to get a small loan.
— Eligibility requirements for small personal loans.
— What to consider when borrowing a small loan.
— What are the current personal loan rates?
— Alternatives to small personal loans.
[Read: Best Personal Loans.]
Where to Get a Small Loan
Small personal loans may be available through banks, credit unions and online lenders. To find the right loan for your needs, first determine how much you need to borrow. For example, if you just need $500 to cover an emergency car repair, then search for lenders that offer that loan amount. Taking out a larger loan than you need means you’ll pay interest on money that you didn’t necessarily have to borrow.
Importantly, you should only borrow a personal loan from a reputable lender. Be on the lookout for predatory payday lenders that offer small loans with no credit check. These loans typically require you to repay the balance in just two weeks and often carry triple-digit APRs. You can find legitimate personal loans by reading lender reviews.
Small Personal Loans Below $1,000
| Lender | Loan Amount |
| First Tech Federal Credit Union | $500 to $50,000 |
| Navy Federal Credit Union | $250 to $50,000 |
| Oportun | $300 to $8,000 |
| PenFed Credit Union | $600 to $50,000 |
Personal Loans of $1,000 or More
| Lender | Loan Amount |
| Alliant Credit Union | $1,000 to $100,000 |
| Earnest | $1,000 to $250,000 |
| LendingClub | $1,000 to $40,000 |
| LendingUSA | $1,000 to $47,500 |
| PNC Bank | $1,000 to $35,000 |
| U.S. Bank | $1,000 to $50,000 |
| Upgrade | $1,000 to $50,000 |
| Upstart | $1,000 to $50,000 |
Eligibility Requirements for Small Personal Loans
Personal loan lenders determine your eligibility based on creditworthiness, looking at your credit score and debt-to-income ratio to decide whether to issue credit and at what interest rate.
Applicants with good credit, defined as a FICO score of 670 or higher, will have the best approval odds for a personal loan. On the other hand, those who have fair or bad credit with a score below 670 may have a harder time qualifying for a loan. Additionally, a higher credit score usually means you’ll get a lower interest rate, and vice versa.
When you formally apply for a personal loan, the lender will conduct a hard credit inquiry, which will temporarily lower your credit score by a few points. If you’re approved for the loan, your credit score should recover after you’ve made a series of on-time payments. But if your loan application is denied, it may be more difficult to qualify for credit in the future.
Can You Get a Small Personal Loan With Bad Credit?
Some lenders specialize in small personal loans for bad credit, but the interest rate is likely to be much higher — up to 36%. It may be possible for bad credit borrowers to qualify for a secured personal loan that’s backed by collateral, such as a car title or savings account. But tread carefully: If you default on a secured personal loan, you risk losing the asset you used as collateral.
Alternatively, some lenders may let you apply for a personal loan with a co-signer, like a trusted friend or relative. Borrowing a loan with a creditworthy co-signer can help you qualify for better repayment terms, like a lower interest rate. Keep in mind that the co-signer would be equally responsible for repaying the loan, so be sure to have a plan in place to make your monthly payments on time.
[Read: Best Bad Credit Loans.]
What to Consider When Borrowing a Small Loan
— Interest rate. A personal loan’s interest rate is the financing charge you pay the lender for issuing you money, so you should aim to get the lowest personal loan rate possible for your financial situation. You should also consider a personal loan’s annual percentage rate, or APR, which represents the total cost of borrowing including interest and fees. Most personal loan lenders let you prequalify to check your estimated APR with a soft credit inquiry, which won’t impact your credit score.
— Loan fees. Some lenders charge personal loan fees, such as origination fees, late payment fees and prepayment penalties. A loan origination fee is typically worth up to 10% of the amount borrowed and, in some cases, may be subtracted from the balance of the loan, which impacts the amount of money you ultimately receive. Prepayment penalties are fees charged for paying off a loan early.
— Repayment term. Personal loans typically have a repayment period of two to five years, although shorter- or longer-term loans may be available. Especially if you’re only borrowing a few hundred dollars, it’s important to choose a short repayment period so you’re not stuck in debt for longer and paying more toward interest. You can use a personal loan calculator to see how the repayment term impacts your monthly payments and total interest charges.
— Funding timeline. Many lenders can issue your personal loan funds directly into your bank account in as little as a few business days after approval. Select online lenders offer next-day or same-day funding, which can be a good choice if you need money for an emergency expense like a car repair or medical bill.
— Usage restrictions. Personal loan lenders may place restrictions on how you can use the funds. For example, you’re typically not able to use a personal loan to pay for college tuition or related expenses that are covered by student loans. There are also restrictions on using a personal loan to pay for a down payment on a home.
[Read: Best Low-Interest Personal Loans]
Alternatives to Small Personal Loans
Personal loans can be used to cover a small expense, but there may be better borrowing options available, depending on why you need the money. For example, it may be possible to enroll in an interest-free payment plan for medical bills, and you may be able to finance a home appliance through a store credit card. Here are a few alternatives to borrowing a small loan
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Credit Cards
While credit cards tend to carry higher interest rates than personal loans, they may be a sound alternative if you need to borrow a small amount of money that you can quickly repay. Credit cards are an even better option if you can charge the small expense and pay the statement balance in full before the next month’s payment due date. That way you can avoid paying interest.
Additionally, you can search for credit cards with an introductory 0% APR period when you open a new account. These zero-interest promotions typically last up to 18 months, giving you plenty of time to pay off a small balance before interest is incurred. It’s important to note that you’ll usually need very good or excellent credit to qualify for a 0% APR credit card offer.
Buy Now, Pay Later
Buy now, pay later companies like Affirm and PayPal let you borrow a small amount of money that you repay in installments over a short period of time, typically a few months. If you’re financing a new appliance, such as a replacement refrigerator, you may be able to qualify for a buy now, pay later financing agreement. And many health care providers have begun including BNPL medical financing options.
Before you enter a BNPL agreement, read the loan terms carefully. Some BNPL providers charge interest as high as 36%, and others may come with steep late payment fees. But in many cases, BNPL can help you break a large expense into smaller payments at little or no cost to you, without a hard credit check.
Payday Advance Apps
Emerging technology has brought a rise in payday advance apps that let you borrow a small amount of money from an upcoming paycheck when you need it. These loan apps can help you access funds on the same day you apply, making them a convenient option if you need money in a pinch. While some apps are free to use, others charge interest or membership fees. Keep in mind that the amount you borrow will be automatically deducted from your next paycheck, so you’ll need to budget accordingly.
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How to Get a Small Personal Loan originally appeared on usnews.com
