A small personal loan can be a quick, convenient option to pay an immediate expense, like a medical bill or car repair, if you don’t have emergency savings or other means to cover the expense. The nonprofit Pew Charitable Trusts says affordable small personal loans should have:
- Monthly payments that are not more than 5% of your monthly income.
- Fixed monthly payments and no balloon payments.
- Loan terms between 3 and 12 months.
You’ll find small personal loans at credit unions, online lenders and a few major banks. Shop around to compare your options:
- Small loans from credit unions may be the best choice for affordable small loans.
- Small loans from online lenders start between $1,000 to $3,000.
- Small loans from banks, when offered, start at $2,000.
- Alternatives to small personal loans include a paycheck advance from your employer or pawnshop loans.
Compare your options for small personal loans
|Where to get a small personal loan||Typical requirements|
|Rent or utility assistance funds, charities, nonprofits, religious organizations||
|Credit unions (Federal or state)||
|Some major banks||
Small loans from credit unions
Your local credit union may be the best place to get a small dollar loan. Since credit unions are not-for-profit institutions built to serve their members, you’re more likely to get an affordable small loan here than at other types of financial institutions. Many credit unions look at more than your credit score when they assess you for a loan.
Many credit unions look at more than your credit score when they assess you for a loan.
What to know:
- You will have to become a member of a credit union to apply for a loan. You can usually become one if you live, work or worship in the area and deposit $25 in a savings account.
- Many federal credit unions offer payday alternative loans, typically between $200 and $1,000, to borrowers with low credit scores.
- By law, federal credit unions can charge maximum APRs of 18% for personal loans and 28% for payday alternative loans.
- State credit unions may have higher rates.
Small loans from online lenders
Many online lenders offer loans starting between $1,000 and $3,000. Online lenders determine your interest rate based on traditional factors such as your credit score, credit history and income, but some also consider other factors, such as your line of work and education level.
What to know:
- Most lenders will let you check rates without affecting your credit, so you can shop around at multiple lenders.
- At a reputable lender, rates for people with bad credit top out at 36%.
- Some lenders may charge origination fees between 1% and 5% of the loan amount. Before picking a loan, look at all the fees the lender charges and how flexible the lender is to see what works best for you.
Online lenders that offer small personal loans
|Lender||Minimum loan size|
Small loans from banks
Not all major banks offer personal loans. Among the five largest banks in the nation, Bank of America, Capital One and Chase no longer issue such loans; Citibank and Wells Fargo still do, as do some smaller banks.
Citibank loans start at $2,000, and customers with Citibank checking accounts can get rate discounts for making automatic loan payments. Wells Fargo loans start at $3,000. Existing customers can apply online, while new customers have to visit a branch.
Alternatives to small personal loans
See if you can work out a payment plan with your creditor.
You have options other than taking a small loan:
- If you can, borrow money from family or friends using a lending circle or a loan agreement.
- If you are at risk of missing a bill, contact your local utility commission to see if you qualify for assistance, or try religious organizations in your neighborhood.
- See if you can work out a payment plan with your creditor — for example, medical bills can often be negotiated.
- Ask your employer for an advance on your paycheck. You can also use an app like Earnin to access your own paycheck ahead of time.
- Try pawnshop loans, which are slightly less expensive than payday loans but don’t damage your credit if you don’t pay them back.