Sometimes, you need a little more money to get through a tight month or out of an emergency situation. When your expenses are looming, a small $5,000 loan or less could help cover your costs.
Where can you find an affordable loan of that size? Here’s what you need to know before taking out a small personal loan and how to decide on the best option.
Where to look for a $5,000 loan
If you’ve started looking for a small personal loan, you might have noticed a trend — many big banks either don’t offer personal loans or offer only higher-value loans. This can make it tricky to borrow only what you need, but it’s not impossible.
1. Find the few big banks that offer small loans
Though some big banks, such as Bank of America and Chase, don’t offer personal loans, a select few offer personal loans of up to $5,000.
Pros: If you’re a customer of a bank that offers personal loans, you might be able to get an interest rate discount on your loan. Also, big banks have branches across the country, making it convenient if you need to discuss your loan details in person.
Cons: Big banks typically prefer borrowers with good credit. If you have fair or poor credit, this option might not work for you.
What to do next: If you prefer a traditional lender, shop around and compare your options. Major banks that provide small unsecured personal loans include PNC Bank, which offers loans of $1,000 and up; TD Bank, which lends a minimum of $2,000; and Wells Fargo, which offers loans starting at $3,000.
2. Visit a credit union for lower costs
A credit union is a member-owned, nonprofit institution that works with its community’s needs in mind. So credit unions often have more attractive interest rates and lower fees than for-profit establishments.
Pros: The products offered by your local credit union might vary, but national credit unions offer standardized products. One example is Alliant Credit Union, which qualified people can join by making a small charitable donation before applying for a personal loan as low as $1,000.
Some credit unions offer payday alternative loans (PALs). This low-cost product is available only through credit unions. You can borrow between $200 and $1,000 for one to six months. The maximum APR is 28.00%, making PALs a more affordable option than traditional high-cost payday loans if you have poor credit.
Cons: Every credit union has different eligibility requirements for accepting members. Some require a small, one-time donation to a particular charity, while others require you to belong to a specific organization or work for a particular employer. So you might not be eligible to join every local credit union.
3. Find a personal loan online
Many online lenders have personal loans that offer more flexibility. Some lenders set borrowing minimums as low as $1,000.
Pros: Some online lenders offer flexible repayment plans. For example, Avant allows you to make changes to your upcoming payments online, including the amount and date of your current or future payments. The company says it’s willing to work with you if you’re unable to make a payment, making it easier to repay your loan.
Cons: If you prefer to talk in person with a company representative about your loan, that’s hard to do with an online lender. Also, different state regulations impact the amount you can borrow online, so depending on where you live, you might not get the amount you need.
What to do next: Many online lenders allow you to check your estimated rate without requiring a hard credit check, so you can start comparing rates without having the process impact your credit score negatively.
4. Consider your credit card (but use caution)
Borrowing on your credit card could be an option if the interest rate is lower than what some personal loan lenders offer.
Pros: If the interest rate on your credit card is lower than the estimate you get elsewhere for a $5,000 personal loan or less, using your card could be the more cost-effective option. And if you’re able to pay back the entire amount during the next billing cycle, you won’t pay any interest charges.
Cons: This strategy can be risky because credit cards don’t have a repayment term. You might end up taking longer to pay back this debt than you would a personal loan and pay more in total interest charges.
What to do next: Compare the interest rates of personal loans you qualify for with your credit card rates. Before you take this route, create a repayment plan you can follow so you can minimize your risk of getting stuck in credit card debt.
What to avoid on small personal loans
You might see advertisements for lenders that will approve you for a loan quickly, no matter your credit situation. These are usually for products such as payday loans or pawn loans.
Though you might be able to get the money you need, the costs you’ll face with these types of loans are very high. A payday loan, for example, can charge fees that equal as much as 400% APR, according to the Consumer Financial Protection Bureau.
Sky-high fees can make it difficult to pay off the debt, potentially starting you on a costly and dangerous cycle of debt that could be impossible to resolve.
Instead, consider the alternatives listed above or check out five other ways to get quick cash in emergency situations.
Do your homework before you take out a $5,000 loan
Some people might consider a $5,000 personal loan a relatively small amount, but it’s still debt that needs to be repaid with interest. Make sure you research various options and that you’re in a position to quickly repay the loan.
Need to compare the costs of each option? Our personal loan calculator can help.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|