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If you are planning on making a purchase and don’t have the ready cash, or you’re experiencing a financial issue, you may have considered a small personal loan.
Small personal loans are typically available from $1,000, depending on the lender, but some lenders offer smaller sums if required. Depending on the amount you borrow, they tend to have shorter terms, which allow you to spread the cost across a manageable period.
Lender | APR | Min. Score | Max Amount | |
|---|---|---|---|---|
| OneMain Financial | 18.00% – 35.99%
| No Minimum
| $1,500 -$20,000
|
| Upstart | 5.20% – 35.99%
| 300
| $1,000 – $50,000
|
| PenFed Credit Union | 8.49% – 17.99% | 650
| $600 – $50,000 |
| Upgrade | 9.99% – 35.99%
| 600
| $1,000 – $50,000
|
| Universal Credit
| 11.69% – 35.99%
| 580
| $1,000 – $50,000
|
| Prosper | 6.99% – 35.99%
| 600
| 2,000 – $40,000
|
| LendingClub | 9.57% – 35.99%
| 600
| $1,000 – $40,000
|
In this article, we’ll explore small personal loans in more detail to help determine if one could be a good fit for your financial requirements. Here are The Smart Investor Select’s picks for the best small personal loans:
OneMain Financial
APR
Loan Term
Minimum Score
Loan Amount
OneMain Financial stands out among online personal loan providers with its extensive network of over 1,500 physical branches, offering convenience to borrowers who may encounter challenges obtaining financing through traditional banks.
Ideal for individuals with poor credit, OneMain Financial provides a viable solution for those facing difficulties securing funding through conventional channels. While the interest rates are higher compared to average rates, they are considerably more favorable than those offered by payday lenders.
Moreover, the quick turnaround time makes it an appealing option for individuals experiencing urgent financial needs. However, if you possess good to excellent credit, exploring alternative providers might be more advantageous.
- Application Options
- Less than perfect Credit
- Joint Applicants
- No Prepayment Penalty
- Many Payment Options
- Higher interest rates
- Fees
- Not Available in All States
- Lack of Rate Discounts
What is the minimum credit score required to qualify for a OneMain Financial loan?
OneMain Financial doesn't have a strict minimum credit score requirement. They evaluate various factors, including your credit history, income, and ability to repay the loan, rather than solely relying on your credit score.
Does OneMain Financial offer discounts or incentives for borrowers?
OneMain Financial does not typically offer rate discounts or incentives for borrowers
Can I apply for a OneMain Financial loan with a co-applicant?
Yes, you can apply for a OneMain Financial loan with a co-applicant. Having a co-applicant can improve your chances of approval and may result in more favorable loan terms.
Are there any restrictions on how I can use the loan funds?
While OneMain Financial allows for various uses of loan funds, including debt consolidation, home improvement, and major life events, there are restrictions on prohibited uses. These include activities like gambling, illegal ventures, and starting a business.
How do I contact OneMain Financial customer service?
You can reach OneMain Financial customer service by phone at 800-525-0451 for loan application inquiries and 800-290-7002 for existing loan inquiries. They also offer support via email at [email protected].
Upstart
APR
Loan Term
Minimum Score
Loan Amount
Upstart offers personal loans tailored to individuals with varying credit profiles, providing an accessible and streamlined borrowing experience. With its innovative approach to underwriting, Upstart considers factors beyond traditional credit scores, making it an attractive option for borrowers with limited credit history or poor credit.
One of Upstart's key advantages is its quick funding process, with borrowers typically receiving funds as soon as the next business day after approval. Upstart's personal loans can be used for various purposes, including debt consolidation, home improvements, medical expenses, and starting or growing a business.
While Upstart offers competitive rates and loan amounts up to $50,000, borrowers should be aware of potential origination fees and late payment penalties. Additionally, the maximum advertised APR of 35.99% may be higher compared to some competitors, particularly for individuals with poor credit.
- Soft Pull Inquiry
- Flexible Credit Requirements
- Quick Turnaround Times
- No Prepayment Penalty
- Transparent Process
- High Interest Rates
- Origination Fee
- No Joint Borrowers
- Limited Repayment Terms
What are the eligibility requirements for an Upstart personal loan?
To qualify for an Upstart personal loan, applicants must be at least 18 years old, have a valid email address and Social Security number, and reside in the United States. Additionally, applicants must have a regular source of income or a job offer starting within six months.
How does Upstart's underwriting process differ from traditional lenders?
Upstart evaluates various factors, including education, employment history, and area of study, in addition to credit score, to make loan decisions. This innovative approach allows Upstart to extend credit to individuals with limited credit history or unconventional backgrounds.
What are the repayment terms for Upstart personal loans?
Borrowers can choose between three- or five-year repayment terms for Upstart personal loans. This flexibility allows borrowers to select a repayment term that aligns with their financial goals and budget.
What fees does Upstart charge?
Upstart may charge an origination fee ranging from 0% to 12% of the loan amount, deducted from the loan proceeds. Additionally, late payment fees and returned payment fees may apply in certain circumstances.
Can I apply for an Upstart personal loan with a co-signer?
No, Upstart only accepts individual applications for personal loans and does not permit co-signers or joint applicants. Each applicant must meet the eligibility requirements independently.
PenFed credit union
APR
Loan Term
Minimum Score
Loan Amount
PenFed Personal Loans offer a versatile financing solution for individuals seeking to address various financial needs. With loan amounts ranging from $600 to $50,000, borrowers have flexibility to fund projects, consolidate debt, cover unexpected expenses, or finance personal events. The application process is streamlined, with quick funding typically within one to two business days, providing borrowers with prompt access to funds.
One of the key advantages of PenFed Personal Loans is the absence of origination or prepayment fees, making them a cost-effective option for borrowers. Additionally, PenFed allows co-borrowers on applications, which can improve approval chances or secure better terms.
However, PenFed Personal Loans has a relatively high minimum credit score requirement of 650, which may exclude individuals with lower credit scores from accessing these loans. Additionally, borrowers must become members to finalize their loans.
- Small Loan Sizes
- No Origination Fee
- Mobile App
- Joint Loans
- Quick Funding
- Financial Hardship Programs
- Membership Required
- High Minimum Credit Score
- No Direct Payments to Creditors
- No Refinancing Option
How quickly can I receive funds after approval?
Funds are typically disbursed within one to two business days, depending on the chosen disbursement method.
Is membership required to apply for a PenFed personal loan?
While membership is not required to apply, borrowers must become members to finalize their loans, which involves opening a savings account with a minimum deposit of $5.
Are there any restrictions on how I can use the loan proceeds?
PenFed personal loans can be used for various purposes, such as debt consolidation, home improvement, and medical expenses, but cannot be used for refinancing student loans or funding secondary education.
Are there any penalties for paying off the loan early?
No, PenFed does not charge prepayment penalties, so borrowers can pay off their loans early without incurring additional fees.
Can I apply for a personal loan if I'm not a U.S. citizen?
PenFed personal loans are available to U.S. citizens and permanent residents with a valid Social Security number or individual taxpayer identification number.
Prosper
APR
Loan Term
Minimum Score
Loan Amount
Prosper is a peer-to-peer lending platform offering personal loans to individuals seeking financial assistance for various purposes. The platform's personal loans range from $2,000 to $50,000, accommodating diverse borrowing needs, and come with flexible terms spanning from two to five years.
One of Prosper's standout features is its accessibility, as it accepts credit scores as low as 600, making it an attractive option for individuals with fair credit who may struggle to secure loans from traditional lenders. Additionally, Prosper offers expedited funding, with approved borrowers potentially receiving their funds as soon as the next business day after approval.
While offering competitive rates and quick funding, presents several drawbacks for potential borrowers. These include origination fees, which can range from 1% to 7.99% of the loan amount, potentially reducing the total amount received. Additionally, borrowers may incur fees for check payments, late payments, and insufficient funds, increasing the overall cost of borrowing.
- Flexible Loan Amounts
- Soft Pull Inquiry
- Joint Applications
- Accepts Fair Credit Scores
- Hardship Program
- Potentially Long Turn Around times
- No Rate Discount for Autopay
- Origination Fee
- No Direct Payment to Creditors
- Limited Repayment Term Options
What are the minimum requirements to qualify for a Prosper personal loan?
To qualify for a Prosper personal loan, you need a minimum credit score of 560, a valid U.S. bank account, and a Social Security number. Additionally, you must be at least 18 years old.
Does Prosper report loan payments to credit bureaus?
Yes, Prosper reports loan payments to all three major credit bureaus (Equifax, Experian, and TransUnion), helping borrowers build or improve their credit scores with timely payments.
Can I change my payment dates with Prosper personal loans?
Yes, Prosper borrowers can change their personal loan payment date once every 365 days by contacting customer support via phone.
How can I reach Prosper's customer service for assistance?
You can reach Prosper's customer service team by phone at 866-615-6319 or via email at [email protected]. Representatives are available Monday to Friday from 5 a.m. to 7 p.m. Pacific Time (PT) for assistance with existing loans or recent loan application submissions.
Upgrade
APR
Loan Term
Minimum Score
Loan Amount
Upgrade offers personal loans tailored to various financial needs, including debt consolidation, home improvements, and large purchases. Founded in 2017 and headquartered in San Francisco, the company operates online, providing convenient access to financial products without physical branches. With loan amounts ranging from $1,000 to $50,000, Upgrade aims to cater to a wide range of borrowers.
Prospective borrowers can apply for a loan online, with a streamlined process that involves filling out personal information and undergoing a soft credit check. Upon approval, funds are typically disbursed within one business day, offering quick access to financing. Upgrade's loans come with fixed-rate options, providing stability in monthly payments throughout the loan term.
However, there are some drawbacks to consider. Upgrade imposes an origination fee on all loans, which can impact the total amount received by borrowers. Additionally, the APRs offered by Upgrade can still be relatively high, especially for individuals with lower credit scores.
- Multiple Rate Discounts
- Joint Applications Allowed
- Simple Application Process
- Quick Turnaround Times
- No Prepayment Penalty
- Higher low end rates for those with excellent credit
- Origination Fee
- Not Available in All States
- No Co-signers Accepted
How do I apply for an Upgrade personal loan?
To apply for an Upgrade personal loan, you can visit their website and fill out the online application. You'll need to provide basic personal information such as your name, address, income details, and employment information. After completing the application, Upgrade will conduct a soft credit check to determine your eligibility
What documents do I need to provide for the application?
During the application process, you may need to provide documents such as pay stubs, W-2s, tax returns, or bank statements to verify your income and financial information. The specific documentation required may vary depending on your individual circumstances.
Does Upgrade offer prequalification?
Yes, Upgrade offers prequalification, which allows you to check your potential loan offers without affecting your credit score. This can be a helpful tool to gauge your eligibility and compare loan options before submitting a formal application.
How quickly can I receive funds after approval?
Once your Upgrade personal loan is approved, funds are typically disbursed within one business day. However, the actual timing may depend on your bank's processing times and how quickly you provide any necessary documentation.
What is the minimum credit score required to qualify for an Upgrade loan?
While Upgrade does not disclose a specific minimum credit score requirement, they typically consider borrowers with a credit score of at least 600. However, meeting the minimum credit score alone does not guarantee approval, as Upgrade evaluates various factors such as credit history and income.
Universal Credit
APR
Loan Term
Minimum Score
Loan Amount
Universal Credit provides accessible personal loans, ranging from $1,000 to $50,000, to individuals seeking financial assistance for various purposes.
To qualify for a Universal Credit loan, applicants typically need a minimum credit score of 580, must be U.S. citizens or permanent residents, and should have a valid email address and verifiable bank account. While Universal Credit does not allow co-signers on loan applications, it offers competitive interest rates based on the borrower's creditworthiness.
Upon approval, borrowers can expect to receive their funds swiftly, often within a day of completing any necessary verifications. Universal Credit does not impose prepayment penalties, enabling borrowers to pay off their loans ahead of schedule without incurring additional fees.
However, Universal Credit include higher interest rates compared to some lenders, potentially increasing the overall cost of borrowing. Additionally, the platform charges origination fees, ranging from 5.25% to 9.99%, which are deducted from the loan proceeds.
- Accepts Fair Credit Scores
- Fast Funding Time
- Flexible Loan Amounts
- Joint Applicant Option
- Free VantageScore Credit Score
- Origination Fee
- No Joint Loans
- No Secured/Co-signed Loans
- Higher Interest Rates
- No Co-signer Option
- Good Range of Loan Size
- Nice Discount
- Fast Funding Time
- Free Credit Monitoring
- Origination Fee
- No Joint Loans
- No Secured/Co-signed Loans
LendingClub
APR
Loan Term
Minimum Score
Loan Amount
LendingClub offers loan amounts ranging from $1,000 to $40,000, borrowers have ample flexibility to address various expenses, including debt consolidation, home improvements, medical bills, and more.LendingClub has a joint loan option, potentially enhancing eligibility and securing more favorable terms.
LendingClub personal loans include the ability to consolidate debt, with direct payment to creditors simplifying the process and potentially securing lower interest rates. The platform also offers flexible payment options, allowing borrowers to change their payment due dates and offering a 15-day grace period for late payments. Moreover, LendingClub does not charge prepayment penalties.
However, borrowers should be mindful of potential drawbacks, such as origination fees ranging from 3% to 8%, which can reduce the total loan amount received. Additionally, the APR for LendingClub personal loans can reach as high as 35.99%, emphasizing the importance of comparing rates and exploring alternative options.
- Soft Pull Inquiry
- Joint Borrowers
- Good For Bad Credit
- No Prepayment Penalty
- Direct payment to creditors
- Origination Fee, Processing Fee
- Potentially Long Turn-Around Times
- High APR range
- Not Available in All States
- Regulatory fines
What are the eligibility criteria for applying for a LendingClub personal loan?
To qualify for a LendingClub personal loan, applicants must be U.S. citizens, permanent residents, or have a valid visa. They must also be at least 18 years old, have a verifiable bank account, and meet minimum credit score and income requirements. Additionally, applicants must have a minimum credit history and meet specific debt-to-income ratio criteria.
Can I apply for a loan if I have a limited credit history?
Yes, LendingClub considers applicants with limited credit history, although meeting other eligibility criteria such as income verification may be necessary.
How long does it take to receive funds after loan approval?
Typically, borrowers receive their loan funds within about five business days after approval, although the timing may vary depending on factors such as verification and processing.
How can I check my loan application status?
Borrowers can log in to their LendingClub account dashboard to check the status of their loan application, providing real-time updates on the progress of their loan.
Can I change my payment due date?
Yes, borrowers with accounts in good standing can request temporary or permanent changes to their payment due date, offering flexibility to adapt to changing financial circumstances.
What Do I Need To Apply For A Small Personal Loan?
To apply for a small personal loan, you'll typically need the following:
Personal Information: This includes your full name, date of birth, Social Security number, and contact information (address, phone number, email).
Proof of Identity: A government-issued photo ID such as a driver's license, passport, or state ID card is usually required to verify your identity.
Proof of Income: Lenders will want to see evidence of your ability to repay the loan, so you'll need to provide recent pay stubs, tax returns, bank statements, or other documents showing your income.
Employment Verification: You may be asked to provide contact information for your employer or submit documentation such as a letter of employment to verify your current job status and income stability.
Credit History: While some lenders may offer loans to individuals with less-than-perfect credit, others may require a minimum credit score or a credit check as part of the application process.
Loan Amount and Purpose: Be prepared to specify the amount you wish to borrow and the purpose of the loan (e.g., debt consolidation, home improvement, medical expenses).
Bank Account Information: You'll likely need to provide your bank account details, including the account number and routing number, for the funds to be deposited if your loan application is approved.
Other Financial Information: Depending on the lender and the specific requirements, you may need to provide additional financial information such as existing debts, assets, or liabilities.
Before applying for a small personal loan, it's essential to review the lender's eligibility criteria and gather all the necessary documentation to streamline the application process
How to Get a Small Personal Loan?
Obtaining a small personal loan is pretty standard practice with most lenders. If you’re shopping online, you may find using a comparison site is the easiest option.
Check Your Credit Score: Before applying, review your credit score. Lenders typically have minimum credit score requirements for small personal loans. If your score is low, work on improving it before applying.
Research Lenders: Look into various lenders, including banks, credit unions, online lenders, and peer-to-peer lending platforms. Compare interest rates, fees, and eligibility criteria to find the best fit for your financial situation.
Gather Necessary Documents: Prepare documents such as proof of income, employment verification, identification (like driver's license or passport), and any other documents required by the lender.
Determine Loan Amount and Terms: Calculate the amount you need to borrow and how long you need to repay it. Small personal loans typically have shorter terms than larger loans, so consider your monthly budget when determining the repayment period.
Apply for Prequalification: Many lenders offer prequalification, which allows you to see potential loan offers without affecting your credit score. This can help you gauge your eligibility and compare offers from multiple lenders.
Complete the Application: Once you've chosen a lender, complete the application accurately and honestly. Provide all requested information and documentation to expedite the loan approval process.
Review Loan Terms: Carefully review the terms and conditions of the loan, including the interest rate, fees, repayment schedule, and any other relevant details. Make sure you understand all aspects of the loan before accepting the offer.
Accept the Loan Offer: If you're satisfied with the terms, accept the loan offer. Be aware that accepting the offer constitutes a legally binding agreement to repay the loan according to the specified terms.
In many cases, the lender will give an approval decision quickly, and upon approval, most lenders will release the funds within a day or two.
Lender Reputation: JD Power And TrustPilot Ratings
J.D. Power conducts extensive surveys to evaluate customer satisfaction in the personal loan industry, including factors like service quality and overall experience.
These ratings offer an expert assessment of a company's performance, aiding consumers in understanding how well a lender meets expectations compared to others. They provide standardized criteria for evaluation, facilitating objective comparisons among lenders.
TrustPilot allows customers to leave reviews and ratings based on their experiences, offering insight into a lender's trustworthiness and reputation. These ratings provide a subjective view, reflecting individual opinions and experiences. Typically on a five-star scale, higher ratings indicate greater satisfaction and trust among customers.
Lender | JD Power Score 2023 (1,000 point scale) | TrustPilot Score 2023 (5 point scale) |
|---|---|---|
American Express | 775 | 1.3 |
Best Egg | 772 | 4.6 |
Discover | 769 | 1.8 |
SoFi | 769 | 4.6 |
Wells Fargo | 756 | 1.7 |
Oportun | 744 | 4.8 |
LightStream | 740 | 1.7 |
Citi | 732 | 1.2 |
LendingClub | 731 | 4.7 |
Prosper | 725 | 4.7 |
Security Finance | 721 | N/A |
U.S. Bank | 717 | 1.3 |
Upgrade | 716 | 4.4 |
LendingPoint | 714 | 4.8 |
Upstart | 711 | 4.9 |
Avant | 710 | 4.6 |
OneMain Financial | 698 | 4.8 |
Opploans | 642 | 4.5 |
Lenders like American Express, Best Egg, and SoFi are top performers, with high J.D. Power scores reflecting strong customer satisfaction. Additionally, lenders such as Upstart and LendingPoint have earned high TrustPilot ratings, indicating positive customer perception and trust.
On the other hand, lenders with lower scores, such as Opploans and Security Finance, may have room to improve in terms of customer satisfaction and trust.
How to Compare Small Personal Loans
Comparing small personal loans is crucial, but many people find the process a little daunting due to the terminology and lengthy loan documents. Fortunately, the actual comparison process is relatively straightforward, providing you know what areas of comparison to concentrate your efforts on.
The features to compare include:
- The Rate: The first thing you’re likely to look at is the rate. This will be determined by your creditworthiness and the terms of your loan. The lower the rate, the less interest you will pay on your loan. One of the problematic aspects of small personal loans is that they are often used as payday loans, which tend to carry a very high rate.
- The Term: Even if you’re looking to borrow a small amount, if you take the loan over a longer term, you will pay more interest across the loan's lifespan. When you’re comparing multiple loan deals, even if the rate is lower, the overall cost is likely to be higher if the term is longer. So, look at the term in conjunction with the rate.
- Fees: While fees are usually outlined in the terms and conditions, they shouldn't be overlooked. You could incur fees for various reasons, such as missing a payment or having a payment returned. Even if you plan to make all your payments on time, administrative errors can happen, and you don’t want to be hit with unexpected or high fees.
- Early Repayment Charges: These apply if you decide that you want to repay the balance of the loan before the specified term. This can happen if you have a financial windfall or if you decide that you want to switch to another lender. However, if you incur an early repayment charge, it could negate the benefits of repaying early.
- Ask questions: there are many questions you can ask your lender, so make sure to review them and perfectly understand any aspect of your loan.
Is a Small Personal Loan a Good Idea?
This depends on your requirements and circumstances. As with any financial product, there are pros and cons associated with small personal loans that you should be aware of before signing on the dotted line.
Pros | Cons |
|---|---|
Spread the Cost | Interest Charges |
Quick Funding | Set Monthly Repayments |
No Collateral Required | Potentially High Fees and Penalties |
Flexibility | Potential for Debt Cycle |
- Spread the Cost
A small personal loan can allow you to spread the cost of a purchase or an unexpected expense with set monthly repayments over an agreed term.
- No Collateral Required
Most personal loans are unsecured, meaning you don't need to put up collateral such as your home or car to secure the loan. This reduces the risk to your assets compared to secured loans.
- Quick Funding
Since the loan amounts are small and the loans themselves are unsecured, you can usually get an approval decision quickly and funding in as little as one business day.
- Flexibility
Small personal loans offer flexibility in how you use the funds. Whether you need to cover unexpected expenses, consolidate debt, finance a purchase, or handle emergencies, a personal loan can provide the funds you need.
- Interest Charges
Some lenders charge a higher rate for their small personal loans.
If you need to cover an unexpected bill, but you’ll have the funds on your next payday, taking out a loan even for a term of a few months is likely to be far more costly than other methods.
- Fees and Charges
Some lenders may charge origination fees, prepayment penalties, or other fees associated with personal loans.
It's essential to review the loan terms carefully to understand the total cost of borrowing.
- Potentially High Fees and Penalties
Many lenders impose a late fee of $35 or more if your regular monthly payment is late.
This means that if you slip up or have an admin issue, you could quickly rack up expensive charges on your account.
- Potential for Debt Cycle
Taking out a personal loan to cover existing debt without addressing the underlying financial issues can lead to a cycle of debt. If you're consolidating debt, make sure you have a plan to manage your finances responsibly and avoid accumulating more debt in the future.
What Are the Main Goals of Small Personal Loans?
While you can typically use a small personal loan for any purpose, there are some top reasons why you may want to consider one.
- An Unexpected Expense: If you need to have significant repairs on your vehicle or some other unexpected expense that you couldn’t cover with your regular paycheck, a small personal loan could allow you to spread the cost into more manageable payments. You can also check for emergency loans.
- An Alternative to Credit Cards: If you have struggled with managing your credit cards in the past, taking on a small personal loan could be a better alternative, with its set payment structure and terms.
- Moving Costs: Moving home can be costly and if you don’t have the time to save a sufficient amount, a small personal loan could provide a solution. You can borrow the amount you need to cover your moving costs and repay it each month.
- Medical Bills: If you have medical bills that are not fully covered by your insurance, you could make up the shortfall with a small personal loan.
Can I Get a Small Personal Loan With Bad Credit?
While many small personal loan products are designed for those with good to excellent credit, there are some lenders who will offer loans to those with bad credit. These lenders may not only consider your credit score, but also other factors.
Specialized lenders also tend to have more relaxed criteria that make it easier to qualify. However, there are some ways that you can improve your eligibility.
- Clean Up Any Errors on Your Credit Report: It is easy to assume that when you have bad credit, there is nothing that you can do. However, there may be errors on your credit report that are contributing to your low score. Request a copy of your report and check carefully for any mistakes, such as outstanding balances, payment errors or unexplained charges.
- Explore Existing Financial Relationships: If you already have a relationship with a bank or lender, check to see if this will be beneficial to getting loan approval. Some banks will offer more flexible terms for their existing customers.
How to Get a Small Personal Loan With Low Interest?
The rate you’re offered will be calculated according to your risk profile. Each lender will assess your creditworthiness according to their own criteria before setting a rate for your loan application. If you want to qualify for a lower rate, there are some things that you will need to do.
- Work on Your Credit Score: The best rates are generally reserved for those with good to excellent credit. So, if you have the time, try to work on improving your credit score. You can do this by reducing your debt to income ratio and credit utilization ratio.
- Consider a Cosigner: If you need the funds in a hurry, you may be able to reduce your available rate by adding a cosigner to your application. If you have a family member with solid credit, they can support your application and provide the lender with the reassurance that if you default, your cosigner will take financial responsibility.
Can I Get a Small Personal Loan With No Credit Check?
While it is possible to get a small personal loan with no credit check, it is something to be wary of. There are a number of banks that offer small personal loans to their checking account holders, but many lenders offering no credit check loans tend to be payday lenders.
These lenders market themselves to those who don’t want to be subject to a credit check. Unfortunately, you pay a sky high premium for this service. Payday lenders typically allow you to borrow the money until your next payday, but may extend the term to up to six weeks.
However, when you look at the APR for these loans, they can be anywhere from 50% to over 300%. There are also hefty penalties if you fail to make your repayments on schedule.
Alternatives to Small Loans
If you’re unsure about whether a small loan is a right choice for you, it is worth considering the alternatives. These include:
- An overdraft: If you have a checking account, you may be able to obtain an overdraft facility for your account. While this may not be for as much as a small personal loan, if you only need a couple of hundred dollars, it could be a far less costly option.
- Credit Cards: If you only need the funds for a very short time, you could simply charge the purchase or bill to your credit card. Providing you can repay it quickly, you should only pay a minimal amount of interest. In fact, if you can repay the funds before the end of your billing cycle, you’ll not pay any interest at all.
- Personal Line of Credit: Many banks and financial institutions offer personal lines of credit. You can apply for this facility in advance, and simply call down funds as and when you need them up to your designated limit. The benefit of this is that you’ll only pay interest on the funds you’ve borrowed.
- Salary Advance: Finally, a cheaper alternative to a small personal loan is to ask your employer for a salary advance. This is only suitable if you need to cover an expense that you can manage with your regular paycheck.
Methodology for Small Interest Loan Selection
To determine the top providers of small personal loans, our team thoroughly researched over 30 different lenders, ranging from major banks and credit unions to online platforms and specialized finance companies.
To create our ratings, we didn't just crunch numbers. We also listened to what individuals like you said mattered most when seeking small personal loans. We identified key features and qualities that were important to borrowers. These factors were then grouped into four main categories:
- Affordability (40%): We gauge how expensive each company’s loans are to pay back, taking into account both interest rates and fees. The highest-scoring lenders will have low minimum and maximum annual percentage rates (APRs) and low or no origination fees.
- Loan features (30%): This category measures the breadth of loan terms available to prospective customers. The most points go to lenders with a wide range of loan lengths, small minimum loans, large maximum loans, and fast funding.
- Customer experience (20%): We review each company’s application, prequalification and customer service policies and procedures to create this category score. The best companies will have simple online applications and multiple ways for customers to get their problems solved.
- Company reputation (10%): Our team analyzes each company’s Better Business Bureau file, customer reviews and any outstanding regulatory actions. The most points will go to companies with an A+ rating with the BBB, a track record of addressing customer complaints and no active regulatory orders.
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.
