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Small-dollar personal loans are often great alternatives to predatory small-dollar loans such as payday loans or auto title loans. Unfortunately, it can often be more difficult to find small-dollar loans, because lenders don’t stand to earn as much interest off of the smaller amount borrowed. Thankfully, we have found plenty of options if you need a small-dollar loan and want to avoid predatory loans.
Credit Unions and Regional Banks
Credit unions are one of the most likely lenders to offer small-dollar personal loans, because their main goal is often to serve their local communities. In addition, credit unions are nonprofits, which means they’re not looking to make as much money as possible. You will have to become a member of a credit union to borrow from one, which can be as simple as living in their service area or giving a small donation to a charity.
Credit unions like PenFed Credit Union offer small-dollar personal loans as low as $500 with APRs as low as 6.49%. PenFed Credit Union offers three-year terms on their small-dollar personal loans, and no collateral is required. Alliant Credit Union also offers small-dollar personal loans starting at $1,000 with no collateral required and repayment terms that vary from one month to five years.
Some regional banks also offer small-dollar personal loans. Regional banks are usually more community-based than larger national banks that have to make decisions across the country rather than in a specific area. For instance, Bank of the West BNP Paribas offers unsecured personal loans starting at $2,000.
Credit unions and regional banks may have a little more wiggle room to bend the loan approval requirements to meet your situation than larger banks. Depending on the credit union or regional bank, the application may take place in person at a branch, over the phone or online. When applying for a small-dollar personal loan, you’ll often need the following:
- Your Social Security number and other personal identifying information
- Income verification
- Asset information
- Your desired loan amount
- Your desired repayment period
- Your desired use of the funds
- Information about your other debt
Large National Banks
Large banks are less likely to offer small-dollar personal loans, but a few do still offer this service. For example, Citi offers personal loans starting as low as $2,000 with repayment periods ranging from 12 to 60 months. Rates start at 7.99% APR, and you must have an annual income of at least $10,500 to qualify. Wells Fargo also offers small-dollar personal loans with 12- to 60-month terms, but their minimum loan amount starts at $3,000 with rates as low as 6.99% and no collateral is required.
Large banks are usually more rigid when it comes to approving loans, so don’t expect them to be able to bend the requirements for your situation. That said, they usually offer a variety of application methods, including in-person meetings at your nearest branch, over the phone or online.
Online lenders are often more flexible when it comes to the types of loans they can offer. Additionally, many online lenders offer specialty loans to underserved markets including small-dollar personal loans. The application process will usually take place on the lender’s website, but you may be able to apply over the phone depending on the specific lender.
Here are a few online small-dollar personal loan lenders you may want to consider. Most online lenders offer unsecured personal loans, but some can offer secured personal loans if you don’t qualify for an unsecured loan or you want to secure a lower interest rate.
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Each online lender has its own qualifications you must meet to be approved for a loan, so you should shop around to find a lender that meets your needs. If your credit isn’t sufficient to obtain an unsecured loan, consider finding a secured personal loan or finding a cosigner with better credit to help you get approved.
Financial Assistance Programs
If you’re having trouble securing a small-dollar personal loan, you may want to consider looking into financial assistance programs. Financial assistance programs can be offered by nonprofits, governmental agencies as well as religious and community-based organizations. You may need to meet certain income requirements or other qualifications in order to gain assistance through a program.
Some of these programs offer small-dollar or low- to no-interest rate loans, while others provide assistance for expenses you may need help covering, such as food and utility payments. Programs will vary based on your location, but here are a few places you may want to start looking for assistance:
If you’re interested in finding governmental programs that can help you, try the benefit finder from Benefits.gov. Programs include those to assist with food costs (SNAP, WIC and programs for school-age children as well as seniors), health insurance and other necessities. You may also want to look into finding your state’s benefits programs, as well as any local programs offered.
Your church may offer financial assistance directly or may be able to put you in touch with religious organizations in your community that can help. Churches may be aware of local nonprofits and governmental programs that can help, as well. If your church and Benefits.gov don’t come up with any solutions, don’t forget about the power of Google. Search “financial assistance” and your locality in Google to see if any local nonprofits or other options are available that you may not have been aware of.
Payday Loans: An Option to Avoid
Technically, payday loans are a type of small-dollar personal loan, but they are an option that should be avoided. Payday loans are typically extremely short-term loans, often as short as two weeks, that charge extremely high fees and interest rates that can often result in APRs exceeding 400%. While these loans are usually easy to obtain and may not require a credit check because they’re extremely profitable for the lenders, they’ll quickly devastate your finances, especially if the loan is for a significant amount.