Best small personal loans in 2022

What is a small loan?

A small loan is usually a personal loan of less than $2,500. Repayment terms vary widely; reputable lenders give you at least a few months to repay a small loan.

Annual percentage rates – the interest rate plus fees charged by a lender – also vary, ranging from around 6% to 36%, with the lowest rates offered to borrowers with strong credit.

Advantages and disadvantages of small personal loans


  • Quick funding. Many lenders can fund a small personal loan the day you are approved or the day after.

  • Lump sum. You get the funds for a personal loan all at once after approval. There is no credit limit or drawing period to remember.

  • Fixed payments. Personal loans have fixed interest rates that keep your monthly payment the same for the life of the loan.

  • No guarantees. Most personal loans are unsecured, so collateral (like a house or car) isn’t needed to borrow. If you don’t repay the loan, the lender can’t take any of your assets, but your credit score will suffer.

The inconvenients

  • Approval based on credit and income. Approval depends on your creditworthiness and finances. Borrowers with thin credit histories, low scores, or low incomes are usually offered higher rates, and some may not qualify.

  • High rates. Personal loan rates can be high compared to other borrowing options, especially for borrowers with low credit ratings and low incomes. Yet, the rates for these loans are lower than those for payday loans.

  • Possible administrative costs. Some lenders charge origination fees of 1% to 10% of the loan amount, which the lender collects before sending the funds to you. If a lender charges these fees, make sure the final loan amount is enough to cover your expenses.

Where to get a small loan

credit unions

To qualify for a personal loan and determine your rate, many credit unions look beyond your credit score to information such as your credit union membership status. Cash personal loan amounts can start below $1,000.

Some federal credit unions also offer alternative payday loans, usually between $200 and $2,000, to borrowers with a low credit score. Federal credit unions charge maximum APRs of 18% for personal loans and 28% for alternative payday loans.

Online lenders

Amounts of loans to online lenders start around $1,000 or $2,000. Many online lenders allow you pre-qualified to preview potential small loan offers, including APR and monthly payment, without affecting your credit score.

Capital Asset Fund is one of the few online lenders with low rates and loans that can be under $1,000. However, these loans are only available in a handful of states, and loan amounts vary from state to state.


The starting amounts for personal loans in banks are usually around $2,000, and banks generally prefer borrowers with good or excellent credit. However, some banks have introduced new low amount loans in recent years. Here are some examples :

  • The Simple loan from the American bank is available in amounts from $100 to $1,000 and is repaid over three months. The loan fee is $6 for every $100 borrowed.

  • Truist’s Ready Now loan is available for amounts ranging from $100 to $1,000 and has a fee of $5 per $100 borrowed. The loan is repaid over six months.

  • Wells Fargo has announced that it will offer small, short-term loans of up to $500 at the end of 2022. These loans will be repaid in three monthly installments, according to the bank.

Most banks require customers to have an open bank account for a few months before they can apply for a small loan.

How to Compare Small Loans

Here are the most important features to look for when choosing a small loan.

APR: The annual percentage rate is the best apples-to-apples cost comparison for all types of loans. The cheapest loan has the lowest APR.

Payments: Review your budget to see how much room you have to repay a loan. A personal loan calculator can help you determine the rate and repayment term you need to get an affordable monthly payment.

Terms: Some small loans have a repayment term of a few weeks or months, while others can be repaid over a year or more. A long repayment term means you’ll pay more interest, so find a term that keeps payments low but helps you pay off debt quickly.

Terms: Some lenders prefer borrowers with strong credit and income, while others accept lower credit scores. Examine a lender’s borrowing terms to determine your likelihood of qualifying.

Funding time: Loan approval and funding can take a few days or up to a week, depending on the lender and how smooth the application process is. If you need funds quickly, look for a lender who offers fast loans.

How to get a small personal loan

  1. Review your credit and debts. Before applying, check your credit report for opportunities to address negative marks or unpaid debts. Also, calculate your debt ratio, which lenders use to see how much of a borrower’s income is spent on other debts. Many lenders prefer borrowers with DTIs below 40%.

  2. Pre-qualified. Since pre-qualification takes minutes with most online lenders and doesn’t affect your credit score, it’s a quick way to compare small loans.

  3. Gather the necessary documents. A loan application may require information such as your social security number, W-2 forms, and pay stubs. Collecting this information before you apply can speed up the loan application process.

  4. Submit the request. This part can be done in person at local banks and credit unions, but many lenders offer online applications. If approved, expect funding within a day to a week. The app will temporarily reduce a few points from your credit score.

How to qualify for a small loan with bad credit

If you have bad credit (FICO score of 629 or lower), you may still qualify for a small loan from a credit union or reputable online lender, but your rate could be on the high end. the lender’s range.

  • Add one co-signer whose credit score or income is higher than yours. A co-signer won’t have access to loan funds or information about your payments, but will be responsible if you don’t repay.

  • Obtain a solidarity personal loan with someone whose credit score or income is higher than yours. Co-borrowers share repayment responsibility and have equal access to loan funds and payment information.

  • Choose a lender that offers secured personal loans. Most lenders allow you to use a bank account or vehicle as collateral.

How to spot a predatory small loan

A small loan of predatory lender can hurt your finances and lock you into a cycle of debt. Watch for these red flags when shopping for a small personal loan.

High interest rates: Reputable lenders cap APRs at 36%, the highest rate most consumer advocates say an affordable loan can have. Some high interest lenders may charge triple-digit interest rates or high fees that make the loan difficult to repay.

Extra short repayment terms: Payday loans are so named because you pay them off on your next payday, usually in two weeks or less. These loans require a lump sum payment (all or most of the loan is repaid at once) and may not give you enough time to collect the funds.

Extra long repayment terms: Installment loans with long repayment terms are attractive because they have low monthly or bi-weekly payments, but some lenders extend the repayment term longer than necessary in order to earn more money on interest. An extra long repayment term, even on a small loan, could see you paying over 50% of what you borrowed in interest.

No credit check: A lender who approves you without checking your credit – or at least reviewing a few months of banking transactions – is not trying to ensure that you can repay the loan. This means the lender doesn’t care if you can repay or bets you can’t, which could lead to you having to borrow more money to pay off the first loan.

Alternatives to small personal loans

NerdWallet recommends exhausting cheaper alternatives before getting a small loan, even if you need the money for an emergency. First consider these options:

About Judith J. George

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