Editor's choice: Upgrade personal loans
- Flexible loan options
- No prepayment penalty
- Loans up to $35,000
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Small personal loans are a handy tool when you need to pay for inexpensive expenses. While how much you can borrow — and the terms of your loan — will vary by lender, you won’t see APRs over 36%.
You have a few places to turn to for small-dollar personal loans, including online lenders, credit unions and banks.
Online lenders are a common choice for small personal loans because of their speed and flexibility. Many serve borrowers with bad to fair credit, although their APR tends to reach the legal maximum of 36%. For borrowers with good to excellent credit, rates can be much lower and are often designed to compete with banks.
Most online lenders only require basic personal information — your name, date of birth, Social Security number and bank account details — to process your application. And if you’re approved, you may be able to receive your loan in one to two business days. For banks and credit unions, you may have to wait a week or more.
Many credit unions — whether local or federal — offer small loans. As nonprofit institutions, credit unions are able to focus on the needs of their members. This means many are able to overlook some problems in your credit history. While you’ll need to be a member to qualify, many local credit unions offer membership to residents of the surrounding area.
If you’re a member of a federal credit union, you might also want to look into payday alternative loans (PALs). These are extremely small loans between $200 and $1,000 with APRs capped at 28%. Smaller credit unions may also offer loans similar to PALs.
Some banks offer small-dollar personal loans, but they’re few and far between. You might want to begin your search with PNC, Citibank or TD Bank — they all have small personal loans starting at around $1,000 or $2,000.
You might also want to consider a local bank. Much like credit unions, these tend to have lower rates overall and less strict lending criteria. And many banks that offer personal loans also offer rate discounts, often up to 0.25% for using your regular checking or savings account to make automatic payments.
Although many short-term lenders refer to their products as personal loans, there’s an important difference: A personal loan won’t have an APR over 36%. Meanwhile, short-term loans tend to come with APRs well over 300%. This can cause many short-term loan borrowers to fall into a cycle of debt — taking out a new payday loan to pay off their first one.
When comparing your options, be sure to check the lender’s rates and fees. If it’s advertising personal loans but offers a high APR, it’s likely a short-term loan provider.
You’re not limited to banks and online lenders when you need a small amount of cash. Here are a few other options to consider:
A small personal loan can be an affordable option when you only need a few thousand dollars to cover an expense. But before you commit, read our guide to personal loans to learn more about how they work and compare lenders.
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