Key takeaways

  • National banks, community banks and credit unions all offer small dollar loans.
  • Approval is based on routine banking activity rather than credit score, but specific eligibility criteria will vary between lenders.
  • Recent negative account activity like multiple bounced checks or overdraft fees can make it difficult to get approved for a small dollar loan.

Small dollar loans are short-term, low-cost installment loans of under $2,500 that are geared toward borrowers with little to no credit. They’re highly regulated on both a federal and state level so the application process is streamlined, but the requirements may vary depending on the bank.

Compared to traditional lending, small dollar loans are relatively easy to get approved for but you’ll need to research your options first, as they’re not as widely available as other loans.

1. Research your options

Since they aren’t available at every bank or credit union, you may have to do some research to find a small dollar loan. You likely won’t have to look too far, as the increased popularity has made them more accessible on a national level.

Select national banks, community banks and local credit unions all offer small dollar loans. Research every available option thoroughly and check if your bank or credit union offers them. You’ll be required to have an open account with the institution to get approved so it’s best to stick with your bank if you can.

Select national banks

Six of the eight largest national banks have started offering small dollar loans to consumers within the last five years. As of 2023, Bank of America, Huntington Bank, Regions Bank, Truist, U.S. Bank and Wells Fargo all offer small dollar loans to their customers.

It’s best to go with the bank you already have an account open with, as the process will be much faster. If your bank doesn’t offer small dollar loans, you’ll need to open an account with one that does.

A community bank or local credit unions

Check your community bank or local credit union’s loan offerings if you’re already a customer or prefer a local lending experience. If you do go with a local bank, you’ll be required to open a checking account.

If you opt for a credit union loan, you’ll need to become a member. The requirements are generally easy to meet and are based on factors like location, occupation and association. Some credit unions may also accept donations to a specific nonprofit organization for membership.

2. Make sure you qualify

Unlike traditional underwriting, which focuses primarily on credit score and history, small dollar loan approval is based on your recent day-to-day banking activity. Account information like withdrawals, deposits, overdrafts and account status are considered, as well as income and employment history.

While there are general approval requirements for a loan, the small dollar loan program (SDLP) statutory requirements state that the loans must be “underwritten with standards that consider the consumer’s ability to repay.”

Even though the documentation requests may vary, there are some approval requirements you can expect with most applications.

  • An active checking account in your legal name (with a participating bank).
  • At least two recent pay stubs.
  • Verification of employment.
  • Valid government-issued identification.
  • At least 18 years old.

Even though these loans are designed for borrowers with low credit, it is still possible to get denied based on your recent account history. For example, if you’ve had checks bounce, overdrafted multiple times or accumulated corresponding fees over the past few months you’ll likely have a harder time getting approved.

If you don’t have a checking account with a participating bank or credit union, you will not be able to get a loan immediately upon opening an account. According to Pew’s affordable credit brief, it will take up to a few months of regular account usage to qualify.

“The major banks that offer small loans all require at least three months of account history before customers can be eligible for these loans, while some smaller banks and credit unions will lend based on as little as one month of account history,” the report reads.

3. Apply and receive your funds

The applications can be completed online or through the bank’s mobile banking app. If you prefer in-person assistance, call your local branch and ask if there’s customer support available.

Because of the simplified underwriting process, the application from start to finish could take just a few minutes.

A typical application process may look something like:

  1. Log in to your mobile and online banking app and look for the link to its small dollar loan application.
  2. Follow the instructions carefully and fill out the application as directed. To make the process easier, have all of the necessary information and documentation on hand.
  3. You should get your application results within one business day (or 24 hours) of submitting your required documentation. Once approved, you’ll sign off on any applicable loan documents and the funds will be deposited into your account.

Frequently asked questions

  • The fastest way to get a small dollar loan is through your current bank or credit union. You won’t need to go through the process of opening a new account, and if yours is in good standing it’ll make the process even faster.
  • Banks and credit unions that participate in the SDLP have online and mobile portals that allow its pre-existing customers to apply for a small dollar loan virtually.
  • Small dollar loans don’t require a credit score for approval like most traditional loans. However, this doesn’t mean that everyone will be approved. Eligibility is largely based on your routine bank account information and activity.All things considered, small dollar loans may be easier to get approved for when compared to personal loans as long as your bank account is in good standing.