Best Small Personal Loans For 2024

Best Small Personal Loans

Best Small Personal Loans: Because of its tiny $250 minimum loan amount, Lake Michigan Credit Union topped our list of the best small personal loan lenders. To identify the top personal loan providers for small loans, we examined 70 lenders and contrasted their interest rates, costs, loan quantities, repayment schedules, and other features.

In our database, Lake Michigan Credit Union has the lowest minimum loan amount, but if you need to borrow more than $250, other lenders have compelling offers. Our top-rated credit union lender overall, Patelco Credit Union, offers affordable rates on loans as small as $300. PenFed is a good option if getting the best rates is your top priority.

No one can get a loan from the perfect lender. There is a lender on our list that can meet your demands, regardless of your credit situation, whether you need a small or large loan, or if you want a secured loan.

Also Read: What Is A Personal Loan For Business?

Small Personal Loans: What Are They?

Most small personal loans have a value of $5,000 or less, sometimes even $250. Since these loans are typically unsecured, no collateral is needed. Small personal loans are available to borrowers via Internet lenders, banks, credit unions, and other financial institutions. They can be used for other purposes, such as paying bills, vacations, and emergencies.

Where Can I Get a Quick Loan for Personal Use?

Any kind of lender, including online lenders, credit unions, and conventional banks, can provide you with a small personal loan. The best place to obtain a small loan isn’t always one. Nonetheless, credit unions are more likely than other lenders to provide loans of less than $1,000, according to our data. Additionally, they frequently waive origination fees, something that online lenders are more likely to do.

Is It Time to File a Small Personal Loan Application?

Your reasons for considering a loan will determine whether a small personal loan is the best option for you. If you don’t have access to other credit and you need money for a big purchase or to get through a difficult financial period, you might want to consider getting a modest personal loan.

Depending on your circumstances, you might be better off utilizing a credit card with a 0% APR rate or saving money for your purchase using other financing options that you already have. If you aren’t eligible for a 0% APR deal, a personal loan will probably have a lower interest rate than a credit card.

Benefits and Drawbacks of Small Personal Loans

It is crucial to weigh the benefits and drawbacks of small personal loans before applying.

Options Not Included in a Small Personal Loan

In some circumstances, personal loans can be a suitable option, but there may be other options that better meet your needs. Here are some to think about:

• Credit card: It might be preferable to use your credit card if it has an introductory rate of 0%. You may be able to reduce your interest costs. If you pay back the remaining amount during the introductory period, you won’t be charged any interest. Additionally, credit cards are fee-free of origination, whereas many personal loans are.
• Save money for your buy: You might want to reconsider your decision to take out a small personal loan to make that purchase. Consider delaying your purchase until you have enough savings to cover the entire cost rather than taking out a personal loan, which carries interest and frequent origination costs.
• Use your emergency money: If you have a rainy day fund (if you have one), you might want to use it rather than a small personal loan to cover an unexpected expense. Create an emergency fund right away if you don’t already have one so you won’t need to borrow money in an emergency.
• Secured loan: Take into consideration a secured loan, such as a home equity loan or home equity line of credit, depending on the amount you need to borrow and how you intend to utilize it. These options can help you get a cheaper interest rate by using the equity in your home as collateral. If you are unable to make the loan payments, you also run the risk of losing your house to foreclosure.

Comparing Low-Amount Personal Loans

Here are some things to think about when evaluating small personal loan offers from different lenders:

• Interest rate: A loan is more affordable the lower its interest rate. The interest rate should be taken into account first, even though it isn’t the only one.
• Fees: Additional loan expenses take the shape of fees. For example, a lot of lenders impose an origination fee, which can drive up the cost of your loan by thousands.
• Loan amounts: Take note of the available loan amounts from each lender and select the one that provides the amount you require.
• Terms of repayment: They might be as short as six months or as long as seven years. The duration of your repayment can have an impact on your monthly payment and interest rate.
• Application procedure ease: Make sure the lender you choose has a simple online application if that’s what you’re looking for.
• Funding speed: While some lenders can fund loans in as little as one day, others may need several. Think about this if you need the money right away.
• Reputation and customer service: Pick a lender who is well-liked by clients and offers all the assistance you require.

How to Steer Clear of Small Personal Loan Predation

When you’re shopping around, it can be simple to become a victim of predatory loans like payday loans or cash advance loans—especially if you’re short on cash or have bad credit.

Payday loans are short-term loans with two to four-week repayment durations; they typically total $500 or less. Their same-day funding and lack of a credit check make them sound appealing. But they are fierce hunters.

Payday loan APRs, which can reach 400%, are the main issue with these loans. These high APRs make it challenging to repay the loans when paired with short repayment durations. A common trap for borrowers is having to take out another payday loan to pay back the previous one.

Keep a close eye on the fine print on interest rates and costs to steer clear of predatory small loans. The majority of reliable lenders don’t charge interest rates higher than about 36%. Furthermore, rather than having short payback periods, genuine personal loans have years-long maturities.

Lastly, be cautious about lenders who provide personal loans without a credit check or guaranteed money. Payday loans are likely what they are if a personal loan doesn’t require a credit check to be approved.

How to Apply for and Be Known Enough to Get a Small Personal Loan

Lenders consider many things before approving loan applications. A lender may give more weight to one factor than to another. The following are some of the most typical factors that lenders look for in prospective borrowers:

• How old are you? Age discrimination is prohibited for lenders. On the other hand, before borrowers can legally enter into a financial contract with a financial lender, certain states have minimum age restrictions.
• Legal residency: Lenders cannot reject you based on your national origin, just like they cannot based on your age. To assess your ability to repay the loan, they could inquire about your place of residence. Remember that non-residents and non-citizens can still be eligible, albeit being accepted might be more difficult.
• Income: The majority of lenders will inquire about your employment status and income. This is to make sure you have sufficient revenue to pay back the loan. Certain companies could have an income requirement before granting you a loan.
• Debt-to-income (DTI) ratio: This ratio shows how much of your monthly income is used to settle your obligations. As a result, it aids in the assessment of your risk by lenders should they decide to grant you credit.
• Credit history and score: To determine your eligibility for a loan, most lenders look at both your credit history and score. These elements could affect your loan terms, amount, and interest rate, but they don’t make or break the choice.

Here’s how to start if you’re thinking about asking for a small personal loan:

1. Pre-qualify: You can usually pre-qualify for a personal loan from most lenders. Pre-qualification can help you determine whether you’ll qualify and at what interest rate without requiring a hard credit check, which means it won’t negatively impact your credit.
2. When looking for a loan: compare offers from a few different lenders to determine which one is best for you. Select a loan option that has a monthly payment you can afford along with a competitive interest rate.
3. Finish your application: After selecting a loan offer, you’ll need to fill out the formal application and send in further information, like employment and income verification. After examining this data, the lender will decide and notify you.
4. Accept your loan offer: You may receive a loan offer right away, depending on your lender and the details you supply. Before you sign your loan agreements, make sure you are satisfied with the interest rate and that you have read the tiny print.
5. Get your loan funds: The amount of money you can get back from your lender could arrive as soon as the same business day. The majority of personal loan providers provide funding in a few days at most.
6. Repay your loan: The payback phase begins as soon as you obtain loan funds. Your loan amount, interest rate, and payback period will all determine your set monthly installments. To make sure you never forget a payment, think about implementing autopay.

Reasons to Believe in Us

To determine the most crucial elements for readers selecting a fair loan lending firm, Investopedia gathered and examined hundreds of critical data points from over 70 companies for three months.

To present our readers with unbiased, thorough reviews and help them make the best choice for their needs, we used this data to evaluate each firm for costs, payback terms, income criteria, and other characteristics. Since its start in 1999, Investopedia has assisted users in locating the finest loans for borrowers with fair credit.

Commonly Asked Questions

Can You Damage Your Credit by Taking Out a Small Personal Loan?

Getting a personal loan might improve or hinder your credit score. A new loan might lower the average age of credit on your credit report and result in a fresh hard inquiry on your account, which would lower your credit score in the short term. Missing payments might also harm your credit.

But, if you make your payments on time, a personal loan can also raise your credit score by diversifying your sources of credit and enhancing your payment history. Your credit usage rate may increase if you’re consolidating credit card debt with a personal loan.

What is the lowest amount that a personal loan can be used to borrow?

Depending on the lender, the lowest amount you can borrow with a personal loan varies. A lender on our list offers the smallest personal loan amount, which is $250. A personal loan might not be the greatest choice if you only need to borrow that much money; instead, you might want to look into other options.