News

Actions

Where to find a small-dollar loan

Posted: 6:38 PM, Aug 29, 2017
Updated: 2017-08-29 23:40:43Z
Where to find a small-dollar loan

A small personal loan can be a quick, convenient option to pay an immediate expense, like a medical bill or car repair.

While many lenders usually offer personal loans above a certain threshold, typically $2,000, you’ll find options for smaller loans at several online lenders and most credit unions.

Unlike an auto or home loan, an unsecured personal loan doesn’t require you to pledge collateral in return for borrowing the money. Your interest rate is based almost entirely on your creditworthiness. If your credit is poor, you can still qualify for a loan, but you’ll pay a higher rate than someone with good credit.

A small personal loan needs to meet certain basic requirements, which are worth remembering when you’re shopping for loans. According to the National Consumer Law Center, loans are considered “affordable” only if they have:

  • A maximum annual percentage rate of 36%
  • A loan term of at least three months
  • Fixed monthly repayment amounts, not balloon payments

Here’s where you can get a small-dollar loan:

Small loans from online lenders

Many online lenders offer loans starting between $1,000 and $3,000.  Online personal loans  are are quick and convenient. Your interest rate is based on traditional factors such as your credit score, credit history and income, but some lenders will 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.

>>MORE:  Compare personal loan rates from multiple lenders

Online lenders that offer small personal loans

Lender Minimum loan size
Ascend $2,000
Avant $1,000
Backed $3,000
Best Egg $2,000
Discover $2,500
Earnest $2,000
iLoan $2,550
Lending Club $1,000
Mariner Finance $500
OneMain Financial $1,500
Prosper $2,000
RocketLoans $2,000
Upstart $1,000

 

Small loans from credit unions

Your local credit union is 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.

What to know:

  • You will have to be 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.
  • Federal credit unions, which are insured by the U.S. government, 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

>>MORE:  NerdWallet’s best credit unions

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.

Borrowers at these banks receive interest rates based on their credit profile and what state they live in. If you have excellent credit and a good relationship with the bank, you may get a low interest rate on a small personal loan. Try calling the bank’s customer service department or visiting its website to get the range of interest rates it offers.

Citibank loans start at $2,000 and require applicants to open a bank account before applying for a loan, among other conditions. Wells Fargo loans start at $3,000. Existing customers can apply online, while new customers have to visit a branch.

No-credit-check loans and payday lenders

There’s no faster way to get a small loan than to visit a storefront or online lender that doesn’t check your credit. That’s because they start with interest rates so high — 200%, 300% or even higher — that most borrowers get trapped in a cycle of debt. Four out of five payday loan borrowers roll over or renew their loans, according to the Consumer Financial Protection Bureau.

Car title loans  and  no-credit-check payday installment loans  are also expensive options, with interest rates above 200%.

If you can’t wait for a personal loan and need cash quickly, try:

If you’re unsure about your credit score,  get it for free at NerdWallet .

Next steps

Build your  emergency fund  to an amount that helps you avoid having to take a small-dollar loan. The recommended long-term goal is three to six months’ worth of expenses, but even $500 in the bank will get you through many small crises.

Consider  working on your credit  over time, which will give you cheaper options from lenders or credit cards when emergencies arise.