10 lenders offering small personal loans

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When you’re faced with unexpected expenses and only need to borrow a small amount of money, small personal loans can be beneficial. (Shutterstock)

When you need to borrow a small amount of money to consolidate debt, pay a medical bill, or cover one emergency costs, you might consider a small personal loan. Smaller loans are unlikely to earn the lender as much interest, so not every lender offers them.

However, many lenders offer personal loans for amounts of $5,000 or less. Here’s how small personal loans work and where to find them.

If you’re looking for a small loan, Credible makes it easy for you View your prequalified personal loan rates from different lenders, all in one place.

What is a small personal loan?

A small loan is usually a loan in the amount of $5,000 or less. You can use the funds from a small loan for almost any expense, including debt consolidation, car repairs, medical bills, or a vacation.

Small loans are installment loans. You receive the money in one lump sum and then make fixed monthly payments (including interest) on the balance over a set period of time.

In most cases, small personal loans are unsecured, so you don’t have to put up an asset as collateral. If you have bad credit, you may qualify for a secured loan, which requires collateral such as your car or a savings account.

If you have little or no credit history, or your score isn’t what you want, qualifying for a small personal loan can be more difficult. Many lenders work with borrowers with bad credit, but they pay a higher interest rate to borrow money than someone with good credit.

Small personal loans can be found at banks, credit unions and online lenders.

Types of Small Loans You Should Avoid

When money is tight, it’s tempting to take advantage of any loan offer you get. However, you should avoid these types of small loans if possible:

  • payday loan — Payday loans are small, short-term loans that are usually due by your next payday. Payday loan lenders do not consider your ability to repay the loan. They also charge sky-high fees and interest, which can equate to 400% annual percentage rate (APR), according to the Consumer Financial Protection Bureau.
  • title loan — With a Title loan, the lender requires the title of your car as collateral. If you don’t repay the loan, the lender can repossess your vehicle to pay off the debt. Title loans have short repayment terms (typically within 30 days) and come with high fees and interest rates.
  • 401(k) loan — If you have a 401(k) plan, you may be able to borrow money from the account. But if you take money from your 401(k) before the age of 59 ½, you pay a penalty for the withdrawal and you may owe taxes on any funds you use. You may also have to repay the loan in full if you leave your current job.

10 lenders offering personal loans under $5,000

If you are looking for a small personal loan, these 10 credible partner lenders are a good place to start:

avant

  • Minimum loan amount: $2,000
  • Minimum creditworthiness: 550
  • Good for: Borrowers with poor credit ratings who need a loan quickly

Discover

  • Minimum loan amount: $2,500
  • Minimum creditworthiness: 660
  • Good for: Borrowers who want longer repayment terms and no lending fees

Lending Club

  • Minimum loan amount: $1,000
  • Minimum creditworthiness: 600
  • Good for: Borrowers who wish to apply with a co-signer

LendingPoint

  • Minimum loan amount: $2,000
  • Minimum creditworthiness: 580
  • Good for: Subprime borrowers with a minimum income of $20,000

One Main Financial

  • Minimum loan amount: $1,500
  • Minimum creditworthiness: none
  • Good for: Bad credit borrowers who have collateral

PenFed

  • Minimum loan amount: $600
  • Minimum creditworthiness: 660
  • Good for: Borrowers who want smaller loan amounts

Thrive

  • Minimum loan amount: $2,000
  • Minimum creditworthiness: 640
  • Good for: Low-income borrowers with fair credit

universal credit

  • Minimum loan amount: $1,000
  • Minimum creditworthiness: 560
  • Good for: Borrowers with bad credit who would use free credit monitoring

Update

  • Minimum loan amount: $1,000
  • Minimum creditworthiness: 560
  • Good for: Borrowers with fair credit scores looking to rebuild their creditworthiness

upstart

  • Minimum loan amount: $1,000
  • Minimum creditworthiness: 580
  • Good for: Borrowers who have a good education and work experience

Visit credible Compare personal loan rates from different lenders without affecting your credit score.

Pros and cons of small personal loans

Small personal loans have advantages and disadvantages that you should weigh before applying.

Benefits of Small Personal Loans

  • Lower interest rates than credit cards — Using a personal loan for debt consolidation can save you money on interest compared to your credit cards.
  • Fast financing — Many small personal lenders offer financing in just a business day or two. Some lenders can even fund your loan the same day you are approved.
  • Options for Bad Credit Borrowers — Even if your credit isn’t perfect, you’ll likely be able to find financing from a lender that specializes in subprime borrowers. But remember that you will probably pay a higher interest rate. Lenders offer theirs lowest interest rates to borrowers with good or very good credit ratings.

Disadvantages of small personal loans

  • Higher Interest Rates Than Bigger Loans — Lenders may charge higher interest rates on small loans to increase their income from the money they borrow.
  • Can Pay Fees — Some lenders charge processing fees for processing the loan or late payment fees. Read the fine print and factor any fees the lender may add into your overall loan cost.
  • Risk of incurring more debt – If you’re using a personal loan to consolidate debt, it can be tempting to spend money on your newly paid off credit cards, leaving you further indebted.

How to apply for a personal loan under $5,000

Once you have decided to apply for a personal loan, follow these five steps:

  1. Create a budget. Decide how much you want to borrow and how much you can afford to pay back each month. This will help ensure you don’t overexert yourself.
  2. Compare rates from multiple lenders. The best way to save money when taking out a loan is to compare interest rates and terms from multiple lenders to make sure you’re getting the best deal for your situation.
  3. Gather financial information. You should have your personal information ready before applying, including proof of income, address and ID. If you have a co-signer, you will also need their information.
  4. Please, fill in the application! After choosing the lender you want to work with, fill out the application. If you apply online, you may have a decision within minutes.
  5. Set a payment date that works for you and start paying off your loan. If you are approved for a loan, you sign a loan agreement and the lender disburses your loan funds. Many lenders allow you to choose the due date of your payment. Choose a date that fits your budget. You can even save on interest if you opt for automatic payments.

When you’re ready to apply for a small loan, Credible can help you quickly and easily Compare personal loan rates to find one that suits your needs.

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