If you have a pressing financial n﷽eed, a small personal loan could be just the ticket to cover it. Small personal loans provide quick cash to cover unexpected expenses or bridge the gap to your next paycheck when finances are tight.
Largღer financial institutions have moved away from offering small loan amounts, but some lenders still offer small personal loans for qualified borrowers.
Small personal🌊 loans are available at online lenders, banks, and credit unions. Financial institutions have less incentive to lend money in smaller amounts, so they may offer higher interest rates𒉰 to compensate.
Here’s what you should know about small personal loans:
What is a small personal loan?
A small personal loan generally refers to a personal loan for $2,500 or less but can be for almost any amount depending on the lender. Small personal loans typically feature fixed interest rates, with th♎e lowest rates reserved for borrowers wit𝐆h excellent credit.
Repayment terms𒆙 on a small loan vary between lenders, but tend to be shorter꧋ than on larger personal loans.
Small personal loans are ideal when you need cash to cover unexpected expenses, such as medical bills, car or home repairs, or debt consolidation. Personal loans can be used for almost any reason unless expressꦗly prohibited by the lender. For example, some lenders won’t approve loans for educational expenses.
How to apply
The application process for personal loans varies betwee♓n lenders. Below are common steps to apply for a ♔small personal loan.
- Review your credit: Lenders rely on credit history, income, and other factors when approving loan applications. This information is also what they use to set interest rates. Reviewing your credit report and credit score helps you see where you stand in the eyes of lenders. You can view your credit report from the three major credit bureaus for free at AnnualCreditReport.com.
- Compare multiple personal loan lenders: It’s important to shop around and consider several lenders before applying for a personal loan. Comparing multiple lenders improves your chances of finding the right loan for your needs. Consider getting prequalified with several lenders to see what kind of terms you’re being offered.
- Complete your loan application: Once you’ve compared rates and chosen a lender, you’ll complete a full application. During this process, you’ll provide any required documentation, like tax returns, pay stubs, and government-issued photo identification. Note that prequalifying for a personal loan doesn’t automatically mean you’re approved for a personal loan. The lender will review your application, credit history, and other pertinent information to determine your eligibility.
- Close the loan and receive your funds: Wait for a loan decision from the lender, which can sometimes take as little as a few minutes or up to a week. If approved, review the loan terms and sign for the loan. After that, the lender will release the funds directly to you. Funding times can vary depending on the lender but can be as quick as the same or the next business day.
Pros
Fast funding: You can often receive loan funds on the same day you’re approved or the next business day.
- No collateral: Personal loans are generally unsecured loans and don’t require collateral,
- Lump sum payment: Personal loans offer a quick influx of cash to meet immediate financial needs.
- Fixed monthly payments: Personal loans generally come with fixed interest rates and set monthly payments that won’t change for the life of the loan.
Cons
- Must meet credit requirements: Personal loans are secured by meeting a lender’s credit and income requirements. Lenders review your finances and credit history to assess your creditworthiness. Lenders may not approve your loan application or may offer higher interest rates if your credit isn’t up to par.
- Higher interest rates: Personal loans often feature higher rates than other financing options, especially if you have poor or bad credit.
- Fees: Some lenders charge an origination fee to process the loan application. Origination fees can range from 1% to 10% of the amount and are taken out of the loan amount before you receive funding.
Frequently asked questions
Here are answers to common quest𝔉ions about smal🌜l personal loans.
Where can I get a small personal loan?
You can find small personal loans at traditional financial institutions, like banks and credit unions. Online lenders also offer personal loans 🌳for various amounts, however, not all lenders provide smaller loans. Shop around to fi🍰nd lenders that offer small personal loans to fit your financial needs.
What are the eligibility requirements for a small personal loan?
Underwriting standards can vary between lenders, but lenders usually consider factors like credit scores, credit history, employment, income, and debt-to-income ratios when determining whether to approve someone for a loan. Check with lenders on eligibility requirements before applying for a personal loan.
What are some alternatives to small personal loans?
Small per🎶sonal loans are helpful if you need access to money quickly for unexpected expenses, but they may not be the choice for you. Alternative financing options include credit cards and “buy now, pay later” services. Look to local charities or nonprofits for assistance if you need money for necessities. You can also turn to a trusted family member or frie🅷nd for a loan.