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

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Looking for a small loan of $3,000 or less? Sometimes you might need access to smaller loans to help cover unexpected expenses, such as car repairs or medical bills. Plus, taking out a small personal loan can be an ideal option for building credit and establishing a foundation for other asset-building loans, such as mortgages and auto loans.

Most larger financial institutions have moved away from the small end of the loan market. However, there are still great options if you need a small loan. You can try a credit union if you need $500 or less, but online lenders are an ideal option if you’re looking for more cash.

What is a small personal loan?

Designed to offer individuals affordable loans with reasonable repayment terms, small personal loans are a fixed-amount, lump-sum loan from a lender to a borrower that is paid back over time, with interest. Small personal loans usually have a principal less than $5,000, shorter repayment periods, and fixed interest rates.

Where can I get a small loan?

Small personal loans are available from several different types of lenders.

Major banks

A few big banks offer small loans of about $3,000 and require a $75 processing fee. Small-dollar loans from large banks are based on the income and credit score of the borrower. Interest rates vary, based on the borrower’s qualifications, but are fixed for the term of the loan.

Credit unions

Credit unions offer smaller personal loans of about $500, for lower interest rates and better repayment terms than most major banks. They often require a borrower to become a member. Existing members can sometimes use their deposits at the institution as collateral to speed up the approval. Consumers who badly need a small loan should shop first at credit unions, as they offer affordable repayment terms.

Online lenders

Online lending companies usually grant loans starting as low as $1,000, but charge higher interest rates. Borrowers can use the lender’s website tools to determine the rates they qualify for quickly. The rate you receive is typically based on your credit score, credit history, and proof of income to determine your interest rate. Some online lenders also consider job status and education.

Here are some of the best reputable online lenders to choose from:

Lender Minimum loan amount APR range Fees
PenFed Credit Union  $600 Starts at 4.99% Late payment fee: $29
Returned payment fee: $30
Upstart  $1,000 3.22% to 35.99% Origination fee: up to 8% of the loan amount
Late payment fee: the greater of $15 or 5 percent of the past-due if your loan payment is more than 10 days past due
Returned payment fee: $15
Paper statement fee: $10
Upgrade $1,000 5.94% to 35.97% Origination fee: between 2.9% and 8% of your loan amount
Late payment fee: up to $10 once your loan payment is more than 15 days past due
Returned payment fee: $10
Rocket Loans  $2,000 5.97% (with autopay) to 29.99% Origination fee: Between 1% and 6% of the loan amount
Late payment fee: $15 if your loan is more than 10 days past due
Returned payment fee: $15
Avant $2,000 9.95% to 35.99% Administration fee: up to 4.75% of the loan amount
Late payment fee: $25 if your loan is more than 10 days past due
Returned payment fee: $15

PenFed Credit Union 

PenFed Credit Union offers unsecured personal loans with no origination fees. You can apply without impacting your credit score and receive the loan proceeds in just two business days if your loan application is approved.

Upstart

Upstart prides itself on offering personal loans with average interest rates 10 percent lower than its competitors. Qualified applicants generally get instant lending decisions and receive loan proceeds within one business day.

Upgrade

Upgrade’s flexible personal loan options come with low fixed interest rates. You can apply in minutes without affecting your credit score and select a monthly payment and loan term that works for your budget.

Rocket Loans

Rocket Loans provides a seamless application process with real-time electronic verification of your identity and income information. Same-day funding is available to select customers.

Avant 

Avant offers personal loans to borrowers with varying backgrounds, including those with past credit mishaps and lower credit scores. It’s quick and easy to check your eligibility for a loan, and you could have the funds in your bank account in just one business day.

Payday loans

Payday lenders offer small, short-term cash advances in exchange for access to the borrower’s deposit account via a post-dated check or electronic transfer authorization. They won’t check your credit score, and you can walk out with cash in less than an hour. They are definitely a last resort, however. Payday loans require a one-time payment of the full amount, plus an outrageously high fee and/or interest — sometimes 1,000 percent or higher. Many borrowers who take out payday loans have difficulty repaying them and become trapped in a cycle of debt.

How to qualify for a small personal loan

Unlike home and auto loans, unsecured small personal loans do not require collateral, but your ability to qualify, the amount you can receive, and the interest rate will be based on your credit score and income history. Less qualified buyers may be denied or pay high interest rates, so the best thing you can do before applying for a small personal loan is to improve your credit score, if possible.

Alternatives to small personal loans

If you have a credit card, you could use it to cover an unexpected expense instead of a personal loan. However, credit cards usually have a higher interest rate than a personal loan, so a credit card is only a good alternative if you’re sure you can pay off the balance in full before more interest accrues than it would with a personal loan. You could also talk to family and friends and request a small private loan.

If you do apply with a bank or credit union, check for application fees and late payment fees, and ask for the repayment schedule. Know exactly how much the loan will cost you overall, and compare it to your budget to make sure you can repay the loan. 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 large “balloon payments” due at the end of the loan term.

Get prequalified for a personal loan

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

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