Best Small Personal Loans Of March 2024 – Forbes Advisor

Compare Personal Loan Rates

Best Small Personal Loans Under $5,000

Best Small Personal Loans Starting at $5,000

Summary: Best Small Personal Loans of March 2024

Methodology

We reviewed 29 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the best lenders based on the weighting assigned to each category:

• Loan cost: 35%
• Loan details: 20%
• Eligibility and accessibility: 20%
• Customer experience: 15%
• Application process: 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

Tips for Comparing Small Personal Loans

Consider these tips when comparing small personal loans:

• Check your credit score. Before comparing small personal loans, check your credit score through your credit card provider or another free credit scoring website. Understanding your credit profile can provide insight into your approval odds and the interest rate you’re likely to qualify for from each lender.
• Evaluate your budget. In addition to determining how much you need to borrow, review your budget to see how much you can afford in monthly payments. Then, narrow lenders to those that offer borrowing limits in line with your needs.
• Take advantage of prequalification. Many online lenders let prospective borrowers prequalify for a loan without a hard credit inquiry. This makes it possible to see what annual percentage rate (APR) you’ll qualify for at various lenders without impacting your credit score.
• Evaluate the lender’s customer support options. While customer support may not seem like a big deal in the honeymoon phase of your loan, it can make a huge difference if you encounter issues with payments or face a financial hardship during your repayment period. Review the lender’s customer service resources and read reviews from past and current borrowers to make sure it’s a good fit.

What Is a Small Personal Loan?

A personal loan is an installment loan that you may borrow from a bank, credit union or online lender. Funds can be used for just about anything; however, some lenders prohibit using funds for business purposes. The definition of a small personal loan varies depending on both the lender and the borrower’s interpretation of the loan amount. In general, though, small personal loans typically have minimum loan amounts between a few hundred to a few thousand dollars.

Pros and Cons of Small Personal Loans

Before you take out a small personal loan, consider all the benefits and downsides, especially for your own finances.

Pros of Small Personal Loans

• May be easier to qualify for
• May come with lower interest rates
• Smaller monthly payments compared to larger loans
• Can help build credit if you make all payments on time

Cons of Small Personal Loans

• May be harder to find a lender
• May be limited to shorter term lengths
• Can damage your credit if you miss any payments

Best Place To Get a Small Personal Loan

Lenders set a number of different standards or rules when they decide to offer loans to the public. One of these standards is a minimum loan amount.

Some lenders decide against offering small personal loans and instead start loan amounts at $5,000 or more. So if you’re looking to borrow a smaller amount of money for an unexpected expense, you may need to do a little more research.

Here are three types of lenders that may offer small personal loans.

Online Lenders

Online lenders are a common resource to consider if you need a small personal loan. Loan options vary, of course, but you may be able to find minimum loan amounts starting between $1,000 to $2,000.

Borrowing from an online lender can often be a quicker process than through a traditional bank or credit union. So if you need to access cash in a hurry, this might be a good option for you.

You may also find bad credit loan options from online lenders if your credit is damaged. Just know that borrowing costs (interest and fees) tend to be higher in these situations than they would if you had a good credit score.

Banks

Banks are another place you may be able to get small personal loans when you need them. And if you’re looking to borrow less than $1,000, you might be able to find more options to suit your needs than with online lenders. Before researching traditional banks, though, start by checking with your current personal bank to see what it offers.

Regardless of if you go through your current bank or a new one, note that the application process is typically more time-consuming compared to online lenders. Some online lenders offer funding within one to two business days.

Credit Unions

Credit unions also provide small personal loans as low as $250. However, with credit unions, there’s a catch-22: most require membership and typically only offer memberships to people of certain communities. This means your options for credit unions are slim compared to traditional banks and online lenders. But if you need a loan of only a couple hundred dollars and have a trusted credit union in your community, it may be worth considering.

Note: While most credit unions require you to live within their community, there are some national credit unions that allow you to become a member with small donations to certain organizations or through other easy-to-meet criteria.

How To Get a Small Personal Loan

The process for each lender can vary, but these are the typical steps to apply for a small personal loan:

1. Check your credit. First, check your credit so you know your credit score and history. If there are any errors, contact the credit bureau to correct them. Knowing your credit score will give you an idea of the loans you can qualify for; a score of at least 610 will give you your best odds of qualifying for a loan, but a score of 720 will likely qualify you for the most favorable rates.

2. Determine your loan amount. Before applying, determine how much money you’ll need to cover your expenses—and what you can afford to repay. This will help you determine which lenders to consider and which options fit into your budget.

3. Prequalify with several different lenders. Prequalifying with lenders can give you an idea of the offers you may qualify for without impacting your credit score. Compare your loan offers to find the loan that best meets your needs.

4. Submit a formal application. Once you’ve determined which loan works best for you, gather all of the necessary information and documents and submit a formal application. Once approved, the funds can be dispersed in as soon as a few hours or in the following days, depending on the lender.

How to Get a Small Personal Loan With Bad Credit

Applying with a co-signer could help you qualify for a personal loan with bad credit. A co-signer is someone who’s also responsible for your debt if you default. Their credit is checked along with yours when the lender runs the application and can also be affected if you miss payments. Because of this, t’s important to explain the repercussions of nonpayment to the co-signer and be sure you can pay back the loan before asking them for the favor.

If you don’t have someone who can co-sign on your loan, some lenders are willing to work with borrowers who have bad credit. Taking steps to improve your credit before borrowing, like reducing your credit utilization, could help increase your approval odds and lower your interest rate.

Be sure to watch out for predatory loans marketed as bad credit loans. For example, it’s best to avoid small payday loans, even as a last resort. Payday loans can have fees that work out to an APR of over 300%, making them difficult to pay back. Some credit unions offer payday alternative loans (PALs) for small amounts of up to $2,000 with lower rates and fees, which could be a better option if you need to borrow a small sum.

How To Spot a Predatory Small Loan

Predatory loans are a common fallback for those who need small personal loans. With little or no qualification requirements and exorbitant fees, predatory loans can lead to a cycle of debt that can be challenging to escape. 

Before taking out a loan, look for these predatory lending features:

• High interest rates. Predatory lenders often charge excessively high interest rates while under the guise of offering loans to individuals with poor credit scores. Typical personal loans will charge interest rates of 36% or less.
• Hidden fees and penalties. Unusually high fees or penalties hidden in the fine print can also signify a predatory loan. These might include origination fees, prepayment penalties or inflated late payment charges. Always ensure you understand all potential fees before signing any loan agreement.
• Aggressive sales tactics. Predatory lenders might try to pressure you into signing a loan agreement without fully understanding the terms. It’s crucial to take your time and never let a lender pressure you into making a quick decision.
• Lack of transparency. Legitimate lenders are transparent about their terms and conditions. If a lender is not clear about the terms of the loan or if it discourages you from reading the fine print, this is a major red flag.
• No credit check required. While it may seem like a benefit initially, lenders that don’t perform a credit check may be predatory. Legitimate lenders need to assess your ability to repay the loan, and a credit check is a standard part of this process.
• Balloon payments. These are large, lump-sum payments due at the loan term’s end. While they might make the loan seem affordable initially, they can cause significant financial hardship when the loan is due.

Alternatives To Small Loans

Taking out a small personal loan can be helpful to people who need fast access to cash for unforeseen expenses. But they’re not the only resource you can use in an emergency situation. If a small personal loan doesn’t seem right for you, consider an alternative.

Credit Cards

A credit card can be one of the fastest ways to access cash in a crunch, especially if you already have an open account with available credit. However, with the average credit card interest rate sitting at nearly 16.5%, according to Federal Reserve data, this also can be an expensive way to borrow.

There are two potential ways to use a credit card in an emergency situation without paying high interest:

• Take advantage of your credit card’s grace period. If you know that you will have access to enough money to pay off your credit card balance by the time your statement due date arrives, you may be able to take advantage of your credit card’s grace period. As long as you can repay the full statement balance by the due date, a credit card can be a short-term, interest-free borrowing solution.
• Open a credit card with an introductory APR offer. Some credit cards may feature a 0% APR offer for a limited time when you open a new account. But if you opt to use a 0% APR credit card to cover an emergency expense, it’s important to have a plan to pay off the debt before the introductory period ends or else interest will begin to accrue. Zero interest credit cards are typically reserved for highly qualified borrowers.

Friends and Family

Borrowing money from loved ones can be another way to access the cash you need when you’re in a financial crunch. According to the Consumer Financial Protection Bureau (CFPB), one in five adults in the U.S. receive financial support from loved ones.

However, loans from friends and family come with a unique set of risks. Missed payments or lingering debt between loved ones could lead to hurt feelings, damaged relationships and resentment. You could also put someone you care about in a financial bind if something goes wrong and you’re unable to repay as promised.

If you plan to ask for a loan from a friend or family member, it’s important to be clear on the arrangement from the beginning. Make a detailed plan that includes the size of your payments, when you’ll make them and what happens if you can’t give your loved one a payment as scheduled. You can use the free worksheet from the CFPB to manage the repayment process.

Nonprofit Organizations

Depending on your financial situation, you might be able to get help from a nonprofit organization. Some nonprofits offer financial relief grants or other forms of assistance to individuals in need of:

• Funds to prevent eviction or foreclosure
• Money for medical or prescription expenses
• Temporary housing
• Utility bill coverage
• Food

If you’re searching for financial assistance, a good place to start is GivingCompass.org. The website features a list of 545 vetted organizations where you can seek assistance or donate. Your local community center, library, food bank or place of worship might also offer help or guidance in this area.

Buy Now, Pay Later Apps

Buy Now, Pay Later (BNPL) apps are digital platforms that allow consumers to purchase an item immediately but defer the payment to a later date, usually in installments. These apps include Afterpay, Klarna and Affirm.

BNPL apps can be a viable alternative to small loans because they typically offer fast approval and don’t require a credit check, making them accessible to a broader range of consumers. They also offer zero-interest installment plans, reducing the overall financial burden.

Consider a Buy Now, Pay Later app if you need to make a large or urgent purchase but don’t have sufficient funds readily available. Keep in mind, though, that they require discipline to avoid overspending and ensure timely repayments to avoid late fees or negative impacts on your credit score.

Recap: Best Small Loans

• LendingPoint. Offers quick funding with low minimum credit score requirements and no prepayment penalty. 
• Universal Credit. This lender offers a wide range of loan amounts with quick turnaround times and flexible qualification requirements.
• Discover. Offers personal loans with no origination fees or prepayment penalties, and the option to directly pay off creditors.
• Upgrade. These personal loans have low minimum credit score requirements and they can be used to cover business expenses.
• Upstart. This lender offers low interest rates and a range of loan amounts. 
• Avant. Offers both secured and unsecured loans with loan terms of up to 60 months. 
• PenFed. There are no origination or hidden fees with this lender, and there are few qualification requirements. 
• SoFi. Offers loan amounts that are much higher than competitors along with lengthy terms.
• Lightstream. This lender offers no origination, prepayment or late fees along with fast funding times. 

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