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Small Personal Loans: Up to $5,000

Small Personal Loans: Up to $5,000; Small personal loans can range from $1000 to $5000. Learn more about small personal loans and find out if small personal loans are for you.
Susan Guillory
Susan GuilloryUpdated January 2, 2024
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Sometimes you need more cash to cover your life expenses than you’ve got in your bank account. You might need money to pay for an unexpected car repair, a surprise medical bill, home improvements, or even debt consolidation.Whatever your need, you’ll probably want to find small personal loans that have low interest and favorable interest rates so that you don’t have to spend more than necessary to get access to that cash. In this article, we’ll talk about small personal loans, how to get them, and what to look out for.

What Are Small Personal Loans?

Small personal loans are loans you take out as an individual that allow you to cover relatively minor expenses like home improvements, moving, or car repairs. You can also use them to consolidate other loans or credit card debt, and if the rate on your small personal loan is less than what you’re paying elsewhere, you may even save on interest. Personal small loans come in varying amounts. Typically, they range from $500 to $50,000, depending on your qualifications and needs.

How Does a Small Personal Loan Work?

Small personal loans work similarly to other types of loans you may be familiar with, like auto or home loans. One significant difference from those two types, however, is that small personal loans tend to be unsecured personal loans. That means that you aren’t required to provide collateral to secure the loan.Why is that important? In the case of an auto or home loan, the car or property serves as that collateral. Having collateral reduces the risk your lender takes on by lending to you. Should you not be able to pay back the loan in full, the lender could seize that collateral to cover what you still owe. Secured loans tend to have lower interest rates than unsecured loans and may be easier to get.But back to your unsecured personal loan! You may need to meet certain requirements to qualify for a personal loan, such as a certain credit score, income level, or other metric. When you apply, you’ll typically be asked for your Social Security number, which may be used to check your credit report. If you’re approved for a small personal loan, you’ll be presented with specific loan options, including interest rate, how long you’ll have to pay it back, and the amount you’re approved to borrow.Once you sign your loan agreement, the funds will be deposited into your account. You’ll be required to start making monthly payments on that balance. You may or may not have the option to pay the loan back in full before the loan term is up, depending on your loan agreement.Recommended: Guide to Getting Employee Loans

Why Get a Small Personal Loan?

Taking out a loan will cost you in interest and fees. But there may be certain situations in which it might be worth that expense to get access to a lump sum.If you don’t have savings set aside and you suddenly have an unforeseen expense, how will you pay for it? For example, if your car breaks down and requires a $2,000 repair and you don’t have the money, you might be left without a way to get to work.Taking out a loan could allow you to pay for that car repair, get back on the road, and keep your job. You could even use a small personal loan to fix your vehicle, such as covering the cost of dent repair on a car door.You might also consider taking out a small loan if you have loan or credit card balances in different places. Rather than making, say, four payments on different balances at different interest rates, you could potentially consolidate all that debt into one loan and start making just one payment each month. Ideally, you could pay less in interest for the single loan than you’re paying now on the different balances.Recommended: Electric Bikes: Average Costs & Financing Options

Sampling of Small Personal Loans

Here are some top lenders to consider if you’re looking for small online personal loans. (The following information on APR range, loan amounts, and maximum term lengths will be updated weekly, every Monday.)
LenderLoan amountsAPR rangeMaximum term
Avant$2,000 to $35,0009.95% to 35.99%60 months
Best Egg$2,000 to $50,0007.99% to 35.99%60 months
LendingClub$1,000 to $40,000 9.57% to 36% 60 months
OneMain Financial$1,500 to $20,00018% to 35.99%60 months
Prosper$2,000 to $40,0007.95% to 35.99%60 months
Universal Credit$1,000 to $50,00011.69% to 35.99%60 months
Upgrade$1,000 to $50,0008.49% to 35.99%60 months

How Do I Apply for a Small Personal Loan?

Whether you opt for quick personal loans online or choose to set up a relationship with a local credit union or bank, it helps to prepare by understanding what’s involved when you apply for small personal loan products.Some applications require just a handful of details; some require more. With most, it won’t impact your credit to apply or see if you prequalify.Usually, you'll be asked for personal details like your name, address, Social Security number, and birth date, as well as your annual income and monthly housing expenses. You’ll then be required to tell the potential lender how much you’d like to borrow as well as what you plan to use the money for.Once your application has been processed, if you’re approved, typically you'll be provided with loan options to choose from and details on what you qualify for in terms of loan amount, interest rate, and repayment terms.After you review the loan documents and sign the agreement, the funds will be deposited into your bank account. Some private lenders can even deposit them the day you’re approved.Recommended: $10,000 Personal Loan

Reasons to Get a Small Personal Loan

There are many reasons to get a small personal loan. For example, a $5,000 personal loan could be used to cover your expenses to move across the country for a new job or help with your dream to adopt a baby.A small personal loan could also be used for:Some lenders may require that you state what you plan to use the funds for, while others will not.Recommended: How Much a Baby Costs the First Year

Pros and Cons of a Small Personal Loan

Before you apply for a personal loan, be sure to weigh the pros and cons:
Allows you to pay for expenses you couldn’t otherwise affordWill cost you in interest and possibly fees
You have months, if not years, to pay back the loanIf you miss a payment or pay late, your credit will probably be negatively impacted
Recommended: Costs for a Bump-Out Addition to a Home

Will a Personal Loan Affect Your Credit Score?

Taking out a loan will almost certainly impact your personal credit score. This score is based on your credit history, which is reported by credit bureaus like TransUnion®, Experian®, and Equifax®. It takes into account much of your financial activity, including any debt you have.A personal loan might actually affect your credit in several ways that the credit bureaus tend to look at favorably. First, if you pay your monthly payment on time, your responsible behavior will generally be reported to those credit bureaus. If you keep your debt-to-credit ratio low (by consolidating credit card debt with a personal loan, for example), that also might have an impact on your score. And once you pay off the loan, that will also probably be reported to the credit bureaus.Recommended: What Are Flex Loans?

Are There Alternatives to Small Personal Loans?

There may be other types of loans you could consider, depending on your situation. If you want to buy a car, weigh the potential benefits of a car loan vs. personal loan. A personal loan may have a higher interest rate than a car loan, since it’s typically unsecured debt.If you don’t have a high credit score, you may not qualify for some small personal loans. In that case, you might want to explore small personal loans with bad credit, which may have more relaxed requirements to qualify. You can also look at a bad credit personal loan with a cosigner if you have a partner or family member with good credit who would be willing to help you qualify for a better rate.Credit cards are another option, though they tend to have higher interest rates than loans do. However, if you get one with a rewards program that will give you perks like cash back or travel rewards, and you pay your balance in full each month, you may find it a great option if you occasionally need to make a purchase for which you don’t have cash on hand.

How to Avoid Predatory Small Personal Loans

Unfortunately, there are predatory lenders out there who take advantage of would-be borrowers, particularly those with bad credit. They may make promises like automatic approval or helping you rebuild credit. In fact, they may really offer exorbitant interest rates and fees.Always read the fine print before signing on the dotted line. You need to understand what the interest rate on the loan is, as well as any origination fees or other fees. It’s also a good idea to research reviews for a lender to see what other people are saying. And it may be wise to look at a range of potential lenders so that you have a sense of what kinds of offers other lenders might make.

The Takeaway

In the right situation, a personal loan may be just what you need to reduce your stress about money. Getting one that has conditions that work well for you is key. Do your homework to find the best option and rate to ensure that you don’t pay more than you have to for the loan.You can compare personal loans interest rates from top-rated lenders at Lantern. Filling out one simple form lets you access multiple offers from our network of lenders.

Frequently Asked Questions

Can you get a small personal loan with bad credit?
How do I qualify for a small personal loan?
How can I get a small personal loan with no credit?

About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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