Even before the pandemic, a personal loan could be the fine thread between a make-or-break scenario. Borrowers would mostly go for affordable monthly payments without thinking about the risks. Some could find affordable loans but their poor credit might bar them from applying.
Americans, most often than not, use personal loans typically for vacations, car repairs, student loans, and weddings among others. Months into the pandemic, the use of personal loans has been more evident in unexpected expenses and medical expenses.
There are a handful of loan lenders with pros and cons to each of them, which will be discussed in this article. Some lenders set their minimums to a high four-figure, thus, leaving you with money more than you intended to borrow. The key to avoid these instances is to find a more flexible lender tailored to meet your needs factoring in your existing debt and credit card debt.
Things you need to know before taking out a Personal Loan
Related: What is a Benefit of Obtaining a Personal Loan?
Knowing the right lender is one thing, while having a game plan on getting them is another. Here is a quick rundown to get you up to speed about small personal loans.
- Small Personal loans, through secured loans, will be guaranteed against your asset
- Another option called unsecured loans does not require collateral but the amount to be borrowed will depend on your credit score
Best Small Personal Loans of 2021
1. Best Online Lender: Upgrade
Upgrade offers a wide variety of options, offering loans as low as $1,000 to as high as $50,000 and are available to clients with a credit score in the good to fair range. Personal loans with Upgrade are transferred as early as one business day after loan approval.
Pros
- Prequalification – meaning you can get assessed without further hurting your possible bad credit score and lower the chances of being rejected.
- Allows co-applicants for better chances of approval.
Cons
- The origination fee ranges from 2.9% to 8.0%
- Maximum APR of 35.97%, higher compared to other lenders.
Other Relevant Information
- You can change the payment date to better suit your financial budget
- APR range is at 5.94% to 35.97%
- Repayment terms are from 36 to 60 months
- You can receive your borrowed funds within one business day
- Self-employed applicants will need additional documents
2. Best for Bad Credit: Avant
Credit scores play a vital role in approval of a personal loan and this is where Avant comes into play as this loan lender offer flexible loan amounts for borrowers with as low as 600 credit score.
Pros
- Approved funds can be transferred within one business day
- Prequalification with soft credit inquiry
Cons
- High administrative fees up to 4.75%, which will be deducted from the loan proceeds
- Does not allow co-signing with other applicants
Other Relevant Information
- You can borrow a minimum loan amount of $2,000 and a maximum of $35,000
- APR ranges from 9.95% to 35.99%
- Administrative fees go up to 4.75%, while the late fee is price at $25 and dishonored payment fee at $15
- Applicants are required to provide proof of income
- Monthly payments go from 24 to 60 months
3. Best for Hardship Protection: Alliant Credit Union
Alliant is a credit union which is available nationwide through the internet. They specialize in short-term loans with extremely competitive rates and viable repayment terms. Alliant also have a program that suspends monthly payments, or even the entire loan balance, without penalty or extra interests in the case of unexpected events that may impair your ability to pay bills. The said program, or the Debt Protection Program, can be utilized for a small monthly additional fee should you join.
Pros
- No charges for origination fee or prepayment fee
- Low APR that is capped at 10.24% compared to other lenders with maxed out APRs of almost 36%
- In most cases, funds can be deposited to the borrow on the same day of application
Cons
- Only credit union members can borrow funds, however joining won’t be complicated
- The monthly payment fee of the debt protection program depends on the size of loan balance
- Long term loans cannot last more than five years
Other Relevant Information
- Minimum loan amount that can be borrowed is at $1,000 and the maximum is $50,000
- APR ranges from 6.24% to 10.24% with autopay options
- There is no origination fee or prepayment penalties
- Repayment terms are from 12 to 60 months
- Membership in the credit union is required
4. Best Repayment Terms: PenFed Credit Union
One of the credit unions in the United States, its services include mortgages, checking accounts, and of course, personal loans among others. Upon approval, PenFed can release your loan within the next day.
Pros
- Minimums are as low as $600
- You don’t have to pay an origination fee
- The loan term can be from six months to five years
Cons
- Credit union membership is required
- Loan amount ceiling is capped at $35,000
Other Relevant Information
- APR ranges from 5.99% to 17.99%
- Other requirements to be considered are co-borrower’s income, debts, and credit score
- Repayment terms are from 6 to 60 months
- Loan amounts are from $600 to $35,000
- Funds can be transferred within the next business day
5. Best for Lowest Borrowing Amounts: Navy Federal Credit Union
Navy Federal Credit Union has one of the smallest loan offers, going as low as $250. Along with the small loan offer, are reasonable terms and competitive interest rates.
Pros
- Shorter loans available up to 36 months, while longer loans start at 37 months up to five years
- Not all applicants can be approved on their own, good thing this Credit Union allows co-borrowers to help approval of loan amounts despite low credit scores
Cons
- Application will open you to a hard credit inquiry which may possibly affect not just your credit score but also your credit history
- Membership for the credit union is required
Other Relevant Information
- Maximum loan amount that can be barrowed is $50,000 with a minimum amount of $250
- Loan discounts of 0.25% are given for eligible active duty and retired military members
- Various perks and discounts including lower rates on car rentals and better insurance premiums among others
- On-the-go access for various devices including Android, Kindle, and Apple products.
- Ability to refinance certain types of loans even from other lenders through a new loan agreement
6. Best for Fair Credit: Upstart
Upstart deviates from the traditional assessment as the lender factors in education, occupation, and income. Despite additional factors, the credit score should still be at 600 at the very least.
Pros
- Soft credit inquiry is applied when checking initial rate
- Funds are transferred as early as the next business day
- Borrowers can make extra payments without getting penalized
Cons
- Origination fee is at 8%
- Your monthly payment will only run for either three or five years
Other Relevant Information
- Loan amount that can be borrowed ranges from $1,000 to $50,000
- APR runs from 6.76% to 35.99%
- Application for a personal loan is only accessible online
- Borrowers can apply for a second personal loan provided they pass certain criteria
- Versatility of fund usage include debt consolidation loans, medical loans, and travel among others
7. Best Credit Union: First Tech Credit Union
First Tech Credit Union happened to be the first Credit Union to offer banking services via a mobile app and provide financial services to companies such as Microsoft, Google, and Amazon.com and alike. This lender also gives you the option to have unsecured loans.
Pros
- You won’t have to pay any application fee, origination fee, prepayment penalty, of any refinance fee
- Joint application is also made possible to give you a nudge if you can’t qualify on your own
- First Tech also offers quick applications online with decision that follows right after
Cons
- The APR of First Tech is not as competitive compared to other lenders
- Membership is required in order to avail of their services
- Fees for late monthly payments are billed for $25
Other Relevant Information
- APR ranges from 6.70% to 18%
- Minimum loan is at $500 while the maximum is capped at $50,000
- Recommended minimum credit score to apply is 580
- One of the services First Tech offers is the ‘Unemployment Protection’ providing you three months of paused payments or reduced payments temporarily
- You have a one-time option to change your due date
8. Best Peer-to-Peer Lender: LendingClub
LendingClub practices the Peer-to-peer (P2P) lending system that enables individuals to get a loan directly from other individuals, removing the need for a middleman such as financial institutions. This lender might not be as strict as the others when it comes to the credit score requirement, but it will surely factor in your credit history and proof of on-time payments.
Pros
- Most personal loans with low credit scores can opt for co-borrowers to provide better chances of being approved
- Minimum amounts as low as $1,000 is available to remove the need to overborrow finances you don’t necessarily need
- You won’t be charged for prepayments
Cons
- A personal loan is constricted by boundaries and are not available in U.S. territories and in the State of Iowa
- LendingClub charge fees in order to process your application and it usually ranges from 1% to 6% of your loan amount
- Depending on the form of payment, it could take four to 10 days before the funds are transferred
Other Relevant Information
- APR ranges from 8.05% to 35.89%
- From $1,000 as the lowest loan amount, you can borrow up to $40,000
- Uses a soft credit inquiry upon application
- Loan terms can be from 36 to 60 months
- You are not allowed to use the loan proceeds for post-secondary education purposes nor for purchasing securities or making investments
Mostly between $1,000 and $5,000, small personal loans can be sourced from three options; Credit Unions, Banks, and Online Lenders. Despite making less profits from below $1,000 loans, some lenders provide a $300 or $500 small personal loan, but they are just a minority in the money lending business.
Recap
| LOAN AMOUNT | APR RANGE | REPAYMENT PERIOD | MIN. CREDIT SCORE | |||
| Max. | Min. | From | To | |||
| Upgrade | $50,000 | $1,000 | 5.94% | 35.97% | 36 to 60 months | 620 |
| Avant | $35,000 | $2,000 | 9.95% | 35.99% | 24 to 60 months | 600 |
| Alliant Credit Union | $50,000 | $1,000 | 6.24% | 10.24% | 12 to 60 months | Not listed |
| PenFed Credit Union | $35,000 | $600 | 5.99% | 17.99% | 6 to 60 months | 580 |
| Navy Federal Credit Union | $50,000 | $250 | 7.49% | 18.00% | 1 to 60 months | 580 |
| Upstart | $50,000 | $1,000 | 6.76% | 35.99% | 36 or 60 months | 600 |
| First Tech Credit Union | $50,000 | $500 | 6.70% | 18.00% | 24 to 84 months | 580 |
| Lending Club | $40,000 | $1,000 | 8.05% | 35.89% | 36 or 60 months | 600 |
Where Can you Get your Personal Loan?
1. Credit Unions
A Credit Union is a member-centric institution built to serve its members and may look past your credit score and instead bank on your relationship with the union. It is overseen by the National Credit Union Association (NCUA) as mandated by the Federal Credit Union Act of 1934.
Although it requires additional steps, benefits such as low APRs will be available once you apply.
2. Banks
Most of the well-known banks do not offer personal loans, let alone small personal loans. That is why the best banks offering small personal loans can be local or small regional banks. There are banks, however, like the Bank of America’s Balance Assist, that provide loans as low as $100 and a flat fee of $5 in order to borrow, repayable for a three-month loan term.
3. Online Lenders
They usually offer applications online with only the most basic information required such as your name, employment information, request loan amount, and the purpose for borrowing. One factor to consider is that they won’t have to review your credit history, removing the possible negative effect on your credit score.
If by chance, your bad credit is preventing you to acquire a personal loan, you can always opt for budget cutting or payment assistance, cash advance, home equity line of credit. When all else fails, you can simply ask your friends and family to be your personal loan lender.
Loan Options if you Have a Bad Credit Score.
1. Payment Assistance
Try to consider getting payment assistance from institutions or from the government to ease your monthly bills. Applying for payment assistance to fund student loans could trim the time you have to pay them.
2. Cash Advance
Cash advance is a short-term loan with a high interest rate and fees often from banks and other alternative lenders. Although it will not directly affect your credit score, it can potentially hurt indirectly with outstanding balances and the credit utilization ratio.
3. Home Equity Line of Credit (HELOC)
HELOC is a line of credit secured against the available equity of your home. With your house as collateral, it often has a lower interest rate compared to other types of loans.
4. Friends and Family
Your friends and family could be treated as personal loan lenders where the interest rate and repayment terms are very flexible. The only thing to remember is that you should respect the agreement as you would do with banks and other lending institutions.
What to Avoid When Getting Small Personal Loans?
1. Payday Loans
Payday loans could be very inciting due to the fact that it does not perform any credit checks prior to application; but a fact to be considered is that it carries a very high interest rate. Most payday loans are usually around $500 or less just enough to help you through the next payday. To avoid ending up in a cycle of payday loans, you can opt for an alternative loan given by federal credit unions.
2. Title loans
Although it will not require credit approval, it will require you to pledge the title of your car prior to the approval of your personal loan and can cost you your asset if you fail to pay. Like payday loans, it has high interest rates.
3. Pawnshop loans
Getting your loan from pawnshops requires exchanging a valuable item and opens you to the vulnerability of losing the item if you fail to complete the loan.
Takeaways
Utilizing a personal loan, or any loan for that matter should be the last resort. It only works to your advantage if the positive effects outweigh the potential money loss from its acquired interest. To lessen the chances where you end up in these scenarios, try to consider these options:
- Open up a savings account to hold your money and make the interest rates work in your favor. In case of emergency, you will be using your saved up money and dodge the problem of debt payment obligations.
- Invest in money market accounts – they pay more than saving accounts when it comes to interests. Another good thing about money market accounts is its ability to limit how often you can make certain transfers.
- Commit to Certificate of Deposits (CDs); leaving your money untouched for a certain period of time could benefit you more when the payout comes.
Finding the best personal loan that would suit your needs requires a lot of research and readings. Make sure you only get information from trusted financial sites.
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