August 8, 2017 in Personal Loans

Getting a small loan doesn’t have to be a big hassle

Looking for a small loan, totaling $3,000 or less? Most larger financial institutions have moved away from this end of the loan market, but many people still need access to smaller loans to help cover unexpected needs such as car repairs or medical bills.

If you find yourself with these sorts of expenses, consider a small-dollar loan. It’s designed to offer low-income individuals affordable loans with reasonable repayment terms. A small-dollar loan can be an ideal option for building credit and establishing a foundation for other asset-building loans, such as mortgages and auto loans.

Requirements for small-dollar loans

Unlike home and auto loans, a small-dollar loan does not require collateral. The interest rate is based on the borrower’s creditworthiness. The borrower’s credit score and income history are the primary factors lenders look at. If the credit is poor, borrowers can still qualify for a loan, but they will have to pay a higher interest rate.

Where to get small-dollar loans

Small-dollar loans are offered by several different types of lenders:

Borrowers planning to apply for a small-dollar loan online should carefully check the lender’s fees, such as the application fee and late payment fee. They should also check the repayment schedule. The National Consumer Law Center says loans of less than $2,500 are considered affordable only if the interest rates are below 36 percent, offer three months amortization, and include no balloon payments.

Use our calculator to help you determine whether debt consolidation is right for you.