5 Places to Get a Small Personal Loan
Mortgages and auto loans get plenty of attention from lenders, but it’s hard to find small personal loans when your needs are limited. Small loans are easier to repay, and they don’t result in thousands of dollars of interest costs. If you need emergency cash, funds for medical care, or extra money while you’re waiting for your paycheck, a small loan may be all you need.
For funding, start with the sources below. You can borrow from credit unions or online lenders, and you can even try for assistance from other sources: nonprofits and service providers may be able to help with your shortfall while keeping you out of debt.
Credit unions are an excellent option for personal loans. As not-for-profit organizations with a community focus, they keep rates competitive, and they may be more willing than national banks to approve your application. You need income to qualify, but you typically don’t need perfect credit to get approved.
Payday loan alternatives: Some credit unions are eager to help you avoid payday loans, which borrowers often turn to for small loans. Credit unions may offer short-term payday alternative loans (PALs) in amounts between $200 and $1,000. NCUA regulations require that lenders keep rates on PALs no more than 10 percent higher than other loans, and credit unions can only charge up to $20 to apply for these small personal loans.
Don’t rule out banks: Local and regional banks may offer similar access to small loans. When a financial institution is engaged in the community, you’re more likely to talk to a real person who can work with you.
Borrowing online is easy and convenient, it’s a great way to shop for low-cost loans. What’s more, online lenders are often willing to work with those who have less-than-perfect credit. They might lend with lower credit scores, or they might evaluate your creditworthiness in creative ways (using rental history, employment history, or a review of your college and graduate degrees, for example).
Typical features: Online lenders include peer-to-peer (P2P) lenders and non-bank lenders. They often offer loans with borrower-friendly features (but verify the details before you borrow): Rates are fixed, there’s no prepayment penalty, and you typically eliminate debt within three to five years.
Compare lenders: As you shop online lenders, check for application fees, which typically come out of your loan balance. Look for reasonable fees, compare offers, and be sure that you’ll end up with enough money to meet your needs after any charges come out.
Depending on how you define “small,” national banks might be an option for small personal loans. In many cases, banks require you to borrow several thousand dollars or more. But if you have good credit and steady income, it may be convenient and inexpensive to borrow—especially if you already have a checking account at one of these banks.
Credit cards: For small personal loans, megabanks may be more interested in giving you a credit card. That allows you to borrow as little as you want—just pay off the balance every month. If you keep a balance on the card, expect to pay interest, and calculate exactly how much it will cost you to borrow. Be sure to include annual fees that add to your total borrowing cost.
Friends and Family
Somebody you know might be willing to help you out, but be careful when borrowing from friends and family. Money can ruin relationships, even if it’s just a small personal loan that the “lender” seemingly shouldn’t care about. Remember that it’s not about the money—perceptions matter, so be painfully clear about your expectations and the lender’s expectations. Even if all goes according to plan, depending on somebody can change your relationship.
Details matter: To reduce problems, formalize the loan. Use a written agreement that details how and when you’ll make payments, interest costs (if any), and other logistics. Discuss and document what happens if you miss a payment. A written agreement can save your relationship, and it may help in tax and legal areas as well. Ask a tax pro and a legal expert for tips before any money changes hands.
If your employer is willing to pay you early, you won’t need to apply for loans or turn to friends and family for cash. Ask about an advance on your pay, and make a plan for the subsequent paycheck—which will be smaller.
Apps: Apps and payroll advance services can also provide funds before payday. In some cases, your employer partners with a service, but some companies approve small personal loans by analyzing your bank account, checking your timesheet, or tracking your location. For example, Earnin allows you to borrow up to $100 (or more), and they take what you owe once your paycheck hits your bank account.
Alternatives to Personal Loans
Instead of getting a loan, you might be able to handle financial shortfalls in other creative ways.
Medical providers: Some doctors allow you to set up a payment plan, and they may even let you repay with no interest costs. Doctors are typically most concerned with providing care and eventually getting paid. Although they aren’t interested in pursuing your debt, they may ultimately send your debt to a collection agency if you don’t pay. Figure out what’s manageable for you, and communicate if you’re unable to make a payment.
Utility bills: It may be possible to reduce your costs for energy and other service providers. Doing so doesn’t put money in your pocket, but it can free up cash flow and allow you to spend elsewhere. Ask your utility providers about any available programs if you’re having trouble making ends meet.
Community assistance: If you’re struggling financially, nonprofit and charitable organizations might be able to help. Start with your local Department of Health and Human Services, and search for other groups in your area that provide assistance. Benefits.gov may also point you toward federal services and organizations in your area.
Sell stuff: It’s often best to avoid debt, and you may be able to raise a small amount of cash by selling things you no longer need. It’s hard to give up things you value, and it’s time-consuming to sell, but being debt-free makes your life much easier.