If you don’t need to borrow more than a few thousand dollars, a small personal loan can be a good alternative to using a credit card.
The best small loans offer lower interest rates than the average credit card. Personal loans are also more predictable because the rates are fixed, unlike on most credit cards. With a fixed-rate installment loan, you’ll owe the same monthly amount for the life of the loan. So you don’t need to worry about getting hit with a surprise rate hike or managing a mushrooming balance.
We surveyed personal loan lenders and whittled our list down to prioritize affordability (low APRs and no origination or early repayment fees), reasonable repayment options, and wide availability (except in the case of our category for military families). In our comparisons, we looked at the average APR for lenders too, which we calculated as the mean rate between the lowest APR and highest APR advertised. We also limited our selection to personal loan lenders with minimum loan amounts of $3,500 or less. These are the best small personal loans.
Best Small Loan Lenders of January 2021
|Lender||Why We Picked It||Fixed APR||Minimum Loan Amount||Maximum Loan Amount||Terms||Recommended Credit Score|
|First Tech Federal Credit Union||Best Overall, Best for Low Rates, Best for Borrowers With Lower Credit Scores, Best for Loans Under $1,000||6.70%-18.00%||$500||$50,000||24-84 months||580+|
|Wells Fargo||Best for Borrowers With Excellent Credit, Best for Shorter-Term Options
||5.74%-24.49% with relationship discount||$3,000||$100,000||12-84 months||670+|
|Marcus by Goldman Sachs||Best for Low Fees||6.99%-19.99%||$3,500||$40,000||36-72 months||660+|
|U.S. Bank||Best If You’re Planning Ahead||6.49%-16.99%||$1,000||$25,000||12-60 months||700+|
|Navy Federal Credit Union||Best for Military Families||7.49%-18.00% (minimum APR may vary based on loan term)||$250||$50,000||6-60 months, home improvement loans can be extended up to 180 months||580+|
First Tech Credit Union: Best Overall, Best for Low Rates, Best for Borrowers With Lower Credit Scores, Best for Loans Under $1,000
This West Coast credit union doesn’t get as much attention as some bigger personal loan lenders, but it offers some of the best small loans around—especially if you aren’t planning to borrow thousands of dollars at a time. First Tech’s personal loans can be as small as $500, and the average of the advertised APRs for loans under $5,000 is about 13%, depending on the length of the loan.
First Tech’s lowest advertised APR isn’t as low as some on this list, but we think the average between the lowest and highest advertised APR is a better way to compare loans, since many applicants won’t get the lowest rate offered. (The average here is low because credit unions must cap their APRs at 18% on most loans.) In fact, some lenders acknowledge only a fraction of applicants—around 10% in some cases—are offered their lowest rate.
First Tech’s repayment periods aren’t the shortest around (you can get loans of $500 to $35,000 with terms of two or three years), but there are no origination fees or early payment fees, so you can always pay your loan off early if you have the funds.
Joining a credit union usually requires a bit of work, but unlike some, First Tech has fairly relaxed standards for who can join. If you don’t live in Oregon or work for a qualifying tech company, you can become a member simply by spending $8 a year on a Financial Fitness Association membership or $15 a year on a Computer History Museum membership.
You can borrow as little as $500
Two years is the shortest term
First Tech Credit Union Personal Loan Details
6.70%-18.00% (rates start at 6.70% for 2-year loans of $500-$35,000, at 8.70% for 3-year loans of $500-$35,000, and higher for longer-term loans with higher minimum borrowing amounts)
|Loan Terms||24-84 months|
|Fees||Late fee up to $25, no origination or prepayment fee|
|Time to Receive Funds||Not disclosed|
|Recommended Credit Score||580+|
Read the full review: First Tech Federal Credit Union Personal Loans
Wells Fargo: Best for Borrowers With Excellent Credit, Best for Shorter-Term Options
If you have an enviable credit score and clean financial bill of health, the loan options from Wells Fargo are quite compelling. The lowest APR for small personal loans at Wells Fargo is just 5.74%. (This includes a relationship discount for current Wells Fargo customers.) Most lenders with lower best-case rates require you to borrow at least $5,000 or otherwise don’t meet our criteria.
You must have a Wells Fargo account to apply for a loan online or by phone, but you can open a savings account online relatively easily (with a minimum deposit of $25 using a debit card, credit card, or check.) Otherwise, you can apply at a Wells Fargo branch.
Keep in mind you’ll probably need to have an excellent credit score to qualify for the ultra-low rate, and even then, there’s no guarantee what you’ll be offered. According to Wells Fargo, only around 10% of approved applicants were assigned the lowest rate in a recent three-month period. (The highest APR offered is 24.49%—on the higher end for our winners.)
We also like that Wells Fargo offers a one-year loan option. For loans of $3,000 to $5,000, you can choose one, two, or three years. Or, for larger loans, you can stretch out your payments for up to seven years. One downside? You can’t borrow less than $3,000.
Lowest available APR is one of the best available
One year loan option
You can't borrow less than $3,000
Highest APR offered is 24.49%
Must have a Wells Fargo account to apply online or by phone
Wells Fargo Personal Loan Details
|Fixed APR||5.74%-24.49% with relationship discount|
|Loan Terms||12-84 months (12-36 months for loans under $5,000)|
|Fees||$39 late fee, no origination or prepayment fee|
|Time to Receive Funds||As soon as the next business day|
|Recommended Credit Score||670+|
Marcus by Goldman Sachs: Best for Low Fees
Marcus by Goldman Sachs is a relatively new retail banking venture for the well-respected investment bank. While none of the loans that made our cut charge origination fees and only one has the potential for a prepayment penalty, Marcus personal loans don’t even charge a late fee if you miss a payment. (If you're late, you’ll just have a bigger balance than you should, meaning you’ll accrue more interest.) In fact, its website emphatically states you won’t ever be charged a fee for anything.
The rates are also quite competitive. The range of APRs offered is 6.99% to 19.99%, making the average 13.49%—more than 3 percentage points lower than the average of the lenders we track.
One downside is somewhat less flexibility. Marcus only offers loans of $3,500 or more. And repayment periods are at least three years. (There’s no prepayment fee, though, so you can always repay early if you’re disciplined enough to do that.)
No fees at all
Lowest available APR is pretty competitive
Minimum you can borrow is $3,500
Loans must be for at least three years
Marcus by Goldman Sachs Personal Loan Details
|Loan Terms||36-72 months|
No late, origination or prepayment fee
|Time to Receive Funds||1-4 business days|
|Recommended Credit Score||660+|
Read the full review: Marcus Personal Loans
U.S. Bank: Best If You’re Planning Ahead
U.S. Bank’s personal loan offer stands out from the pack with competitive rates for every qualifying borrower and unusually flexible loan terms. It would have been our runner-up to the overall winner had it not been for one important stipulation: Only someone who has been a U.S. Bank customer for at least three months is eligible to apply.
But, if you’re planning ahead, you should seriously consider opening a U.S. Bank account in order to be eligible to apply. For one, the lowest advertised APR is 6.49% (as long as you borrow less than $5,000 for no more than four years.) But even if your credit score or borrowing terms don’t qualify for the lowest rate, the highest rate you’d get is an impressive 16.99%—about as good as you’ll find among any personal loan lender.
Besides using a credit card with a 0% APR introductory offer—which isn’t likely to give you longer than 15 to 18 months before a double-digit rate kicks in—a U.S. Bank personal loan may very well be among your best options if you have good credit. Unfortunately, if you don’t have a U.S. Bank relationship, you’ll need three months of lead time.
U.S. Bank is also one of very few personal loan lenders with competitive rates that allows applicants to borrow as little as $1,000. (First Tech being another.) Plus, like Wells Fargo, you can borrow for just one year, if you wish. Most lenders with competitive rates require borrowers to commit to significantly larger loans lasting at least two years.
Unusually low rates for all borrowers
A strong APR for borrowers with the best credit who borrow less than $5,000
Loan amounts as low as $1,000
Loans as short as one year
You must have become a U.S. Bank customer at least three months before applying
U.S. Bank Personal Loan Details
|Fixed APR||6.49%-16.99% (6.49% is only available to qualified applicants on loans of less than $5,000 with a term of 48 months or less)|
|Loan Terms||12-60 months|
|Fees||$29 late fee if your payment is more than five days overdue; no origination fee or prepayment fees|
|Time to Receive Funds||Within one business day (possibly immediately)|
|Recommended Credit Score||700+|
Read the full review: US Bank Personal Loans
Navy Federal Credit Union: Best for Military Families
If you or a family member are or were in the military, you can apply to borrow as little as $250 from Navy Federal and still get some of the lower interest rates around. This is an exceptionally low borrowing amount, even among lenders that focus on servicemembers.
For loans lasting for three years or less, the most creditworthy borrowers will get an APR as low as 7.49%. (The repayment term to borrow $250 would be just six months.) And since Navy Federal is a credit union, you’ll never be offered an APR higher than 18%. For someone wanting to borrow under $1,000, these are very competitive rates, even a smidge lower than First Tech’s. Other lenders that focus on military members have similar rates, but have bigger minimum borrowing amounts.
Navy Federal Credit Union is restricted to active duty and retired military service members, veterans, reservists, Department of Defense civilians, and their families.
You can borrow as little as $250
Very competitive rates
Repayment terms can be as short as six months
You must be in or affiliated with the military
Navy Federal Credit Union Personal Loan Details
|Fixed APR||7.49%-18.00% (14.79%-18.00% for loans lasting 37-60 months; 15.29%-18.00% for select loans over 60 months)|
|Loan Terms||6-60 months, home improvement loans can be extended up to 180 months|
$29 late fee, no origination or prepayment fee
|Time to Receive Funds||As soon as 1 business day|
|Recommended Credit Score||580+|
Read the full review: Navy Federal Credit Union Personal Loans
When Does a Small Personal Loan Make Sense?
A small personal loan is worth pursuing when using a credit card would either be impossible (because you need to borrow more than your credit limit) or more expensive.
Just remember to factor in how long you’ll need to pay off your loan or credit card debt, so that you’re comparing your total borrowing costs, not just the interest rates.
Even though rates on credit cards are often higher than on personal loans, if you take longer to pay off a personal loan, you may very well pay more in interest overall. When comparing your options, consider how much you can afford in monthly payments and make sure you’re not stretching out your borrowing any longer than you need to.
There aren’t typically many restrictions on what you can use a personal loan for, but they’re often used to isolate larger expenses—like a major home or car repair, a move, or a wedding—or to consolidate higher-interest debt from your credit cards. In general, you’re better off reserving personal loans for required expenses so you don’t take on unnecessary debt.
One of the nice things about fixed-rate personal loans is that your payments are very predictable. Variable-rate lines of credit (like credit cards) are complicated by compound interest and changes in benchmark rates, adding more uncertainty to your required monthly payments. Even if you pay more than your minimum requirement, which we recommend, it can be harder to keep track of what you need to pay to be paid off by a certain date. With a personal loan, it’s easier to plan out your payments and fold them into your budget.
Of course, before taking on any debt, you should always consider if there are other options for accessing the money you need, like borrowing from a relative, or selling some belongings you no longer want.
What to Watch Out for With Small Personal Loans
Some personal loans can be surprisingly expensive––especially if they’re crammed with fees and penalties. Although personal loans are often touted as a way to consolidate credit card debt to a lower-interest alternative, some lenders charge extremely steep APRs to the less creditworthy applicants, significantly higher than the worst-case rates offered by credit cards.
As of Aug. 24, 2020, the average of the interest rates advertised by the 31 lenders we closely track was 16.51%.
Before you apply for a loan, look carefully at the range of APRs disclosed. Even if a lender prominently advertises an eye-catching starting rate, remember that’s reserved for the most creditworthy of the approved applicants. Other borrowers could get offered APRs two to four times that rate. In fact, the "average" APR we refer to is never the true average, since we can’t average every APR offered, and a disproportionately low number of borrowers will be awarded the lowest rate.
Some lenders will let you use an online tool to check your rate before you actually apply for the loan. Make sure the tool or website clearly states that checking won’t hurt your credit score and keep in mind that you’re not guaranteed to be approved or to get the rate you’re quoted (though it’s more likely.) Of course, if you do get assigned a higher rate upon approval, you can always decline the loan, but it may ding your credit score.
You should also look for loans with either no or low origination fees, which can be costly, particularly on larger loans. These fees may be 1% to 8% of the loan amount, making a $3,500 loan cost an extra $35 to $280 right off the bat. Finally, if at all possible, avoid a loan that will penalize you for paying your loan off early––especially if you choose a longer repayment period.
Keep in mind, too, that even if a lender doesn’t charge an early repayment fee, some charge higher rates if you choose a longer loan term, making the length of the loan more important than you might think. Plus, depending on your financial habits, it may be more difficult for you to make bigger payments than you’re being billed for.
If you’re in a bind and need a very small loan ($200 or $300, perhaps) you may hear people mention so-called payday loans or even pawn shop loans. Both of these options are typically extremely expensive and should be avoided. Two-week payday loans, for instance, may charge $10 to $30 for every $100 borrowed. (More on alternatives to payday loans below.)
Other Places to Look for Small Personal Loans
If you want to do additional research, 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.
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% higher than other loans, and credit unions can only charge up to $20 to apply for these small personal loans.
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 technology or alternative sources of information.
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.
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.
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 or need and 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.
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 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.
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.
How We Chose the Best Small Personal Loans
We evaluated 45 personal loan lenders and rated them according to the following criteria:
- Lowest minimum, maximum, and average advertised APRs
- Lowest borrowing minimums
- Widest variety of repayment terms
- Lack of fees, including origination and early repayment fees
The lenders that made our best list had to make their loans widely available (with the exception of the Navy Federal loans). We excluded lenders requiring a loan amount of more than $3,500 and those that didn’t readily disclose all relevant terms online. Our recommended credit scores are based on the FICO 8 credit-scoring model.
Compare Personal Loan Rates With Our Partners at Fiona.com
First Tech Federal Credit Union. "Invest In You." Accessed Dec. 11, 2020.
Wells Fargo. "Personal Loan Rates." Accessed Dec. 11, 2020.
Wells Fargo. "Personal Loans." Accessed Dec. 11, 2020.
Marcus by Goldman Sachs. "Paying Late." Accessed Dec.11, 2020.
Marcus by Goldman Sachs. "Online Loans: Why and How to Borrow." Accessed Dec. 11, 2020.
U.S. Bank. "Personal Loan." Accessed Dec. 11, 2020.
Navy Federal Credit Union. "Personal Loans." Accessed Dec. 11, 2020.