Guide to Small Personal Loans

A small personal loan is the ideal solution for people who need to borrow $5,000 or less. Statistics show that most consumers are well over their heads in debt due to excessive borrowing. Globally, household indebtedness totaled an overwhelming 233 trillion dollars in 2018! At the same time, there has been a surge of consumers around the world scrambling for information on how to reduce their debt load.

More borrowers than ever are choosing small personal loans rather than risk being tied down to expensive and lengthy repayment terms. Excessive borrowing often leads to overspending habits due to access to more money than is needed. It makes good financial sense to borrow only what is affordably necessary. There are a variety of choices available for people who want to keep their borrowing under control.


- Out of the Box Sources for Small Loans

- Yes to Bad Credit

- VIP Treatment for Good Credit

- Dot Com Lenders

Out of the Box Sources for Small Loans

There is no shortage of loans that fit practically every consumer profile. Among these are loans for people with good credit, bad credit, and those with every score in between. Loans are even available without the lender doing a credit check at all.  Faced with so many loan choices, it makes sense for borrowers to get information that will point them in the right direction.

Traditional lenders are frequently the first source that consumers turn to for all types of loans.  They do offer a generous amount of different options for repayment, flexible fees, and convenient features. They are also quick to offer enticing incentives to customers to coax them into signing on the bottom line. However, the well-known banks usually have more strict credit requirements and will not approve loans for customers with poor credit. 

Other places to get a small personal loan:

  • Credit unions offer loans to its members in the community, often with lower interest rates and easier approval.
  • Online lenders take applications 24/7 and process personal loans very quickly; borrowers can find more relaxed qualifications.
  • Retirement savings plans can be another source to find a loan. Employees may be able to borrow money (within government limits) with no credit check.
  • Cash advances and payday loans are a snap to get. But the interest and fees charged are unreasonably inflated. These two options should be a last resort since there is high risk of getting caught in an endless cycle of debt repayment.
  • Peer-to-peer lending is an online funding source in which individual people are the lenders. Repayment is usually short-term, typically 2 to 5 years.
  • Relatives and friends may be able and willing to lend money in a pinch. And if they’re really generous, they don’t charge fees or interest.

Each of the options above has disadvantages that should be taken into consideration. For instance, borrowing from a retirement account may derail some long-term financial goals planned for the future. Borrowing from friends and family could result in bad blood down the road, especially if there is a default. For the best outcome, borrowers should carefully weigh out the pros and cons ahead of accepting cash.

Yes to Bad Credit

The need to finance doesn’t disappear just because an individual has taken some hard hits to their credit. Emergencies and unexpected expenses can and will pop up quickly for everyone. Excellent credit can be destroyed quickly by one misfortune such as sudden job loss. What, if any, kinds of help can a person with bad credit expect to find in such a situation? Fortunately, poor credit does not prohibit consumers from getting funding when needed.

There is no guarantee that any personal loan application will be approved, regardless of a credit score. However, the odds of getting a yes can be increased by applying a few principles, such as:

  • Getting a copy of the credit report early to get a credit score and uncover any errors in the credit file.
  • Checking ahead of time to know if the credit score is acceptable. Lenders today often publish their eligibility criteria or gladly discuss their requirements over the phone.
  • Compare rates and terms before applying and only apply for loans that are affordable.

After finding a lender that is a good fit, the borrower should fill out an application and submit all required documentation. Practically all types of lenders will deposit loan proceeds into a bank account when there is an affirmative answer to a loan request. 

VIP Treatment for Good Credit

For the most part, lenders treat anyone with a credit score over 720 like a financial superstar. They are offered lower interest rates and favorable terms because they are viewed as less risky borrowers. Even so, borrowers with good credit should never assume all credit offers are the same. The terms and interest rates vary greatly between lenders. 

The equivalent of the credit score silver metal goes to borrowers with a 690-719 rating. This good score also affords advantages like lower interest on unsecured personal loans. Although they don’t get top billing, people with good credit scores will usually be approved for most types of credit without too much hassle. 

Comparing personal loans is just as important for people with excellent to good credit as poor credit borrowers, if not more so. It is possible to make wrong choices regarding personal loans that can result in the inability to pay. Suddenly, a stellar credit record is destroyed, which can take years to reverse. Borrowers should use caution when choosing a lender and definitely compare lenders to get affordable rates and fees.

Dot Com Lenders

A quick search online for unsecured personal loans will return thousands of lenders who offer all kinds of promises to solve money woes. Consumers in a financial bind can’t believe their eyes when they see words like “Get $50,000 in your account by tonight! No credit or collateral needed.” Although it may seem too good to be true, there are companies online that will fork over tens of thousands of dollars in cold hard cash to people without good credit. Most likely, the offer is filled with debt traps and trouble. 

There are reputable online lenders that give people a fair shake. People who need to borrow a small loan of $5,000 or less can do so successfully. These tips can help make the transaction a win on both sides:

  • Borrowers should look for short-term loans to get out of debt faster. They should be prepared to pay higher interest, especially if their credit is banged up.
  • A major draw for online borrowers is convenience, including instant rate quotes and fast approval. Still, it is best to slow down and compare lenders first.
  • Any type of online financial transaction can pose a security risk to personal information. It is important to make sure the loan process takes place on the lender’s official website.
  • Like brick and mortar lenders, people with good credit should be rewarded with better interest rates and fees. If a lender offers the same terms for any type of credit, it should be considered a red flag.
  • Any business can go under by the time the first payment is due. Borrowers should look for reputable online lenders who have earned a good reputation over the years.

A small personal loan can be all that is needed to solve a minor financial issue. An affordable loan can be paid as agreed, which may lead to improved credit. Whether borrowing online, in person, or from an alternative lending source, the key is to ponder the pros and cons before jumping into a commitment, a combination which leads to a good ending.

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Sheila Kay

Sheila Kay is an author, ghostwriter and editor residing in the Atlanta, GA area. Among her favorite writing genres are creative nonfiction, self-improvement, and finances. Her first published book, PTSD and the Undefeated Me, is a memoir which has been a stepping stone to her involvement with mental health advocacy for military and civilian men and women. She is currently working on the first fiction novel to be published under her name. For more information or to purchase her books, visit Sheila’s Author Page on