Best Small Personal Loans of December 2024

What is a small personal loan?

A small personal loan is a loan for generally less than $2,500. Repayment terms vary widely, but reputable lenders give you at least a few months — if not a couple of years — to repay a small loan.

Annual percentage rates (APRs) on small personal loans range from about 6% to 36%, with the lowest rates offered to borrowers with strong credit.

Pros and cons of small personal loans

Pros

• Fast funding. Many lenders can fund a small personal loan the day you’re approved or the next day.

• Lump sum. You get the funds from a personal loan all at once after approval. There’s no credit limit or draw 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 collateral. Most personal loans are unsecured, so collateral (like a house or car) isn’t required to borrow. If you don’t repay the loan, the lender can’t take your possessions, but your credit score will drop.

Cons

• 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, especially for those with low credit scores and incomes.

• Possible origination fees. Some lenders charge an origination fee of 1% to 10% of the loan amount, which is either taken from the loan before you receive the funds or added to the monthly payment. If a lender charges this fee, make sure the final loan amount is enough to cover your expense.

Where to get a small loan

Credit unions

Credit union personal loan amounts can start below $1,000, and federally-chartered credit unions cap APRs at 18%. Many credit unions look beyond your credit score on a personal loan application and review information like your membership history.

Some federal credit unions also offer payday alternative loans. These are small loans of $200 to $2,000 with rates capped at 28%.

Online lenders

Online lenders can provide personal loans for as little as $1,000 or $2,000. Many online lenders let you pre-qualify to preview potential small loan offers, including the APR, repayment term and loan amount, without affecting your credit score.

Capital Good Fund is one of few online lenders with low rates and loans that can be less than $1,000. These loans are available in only a handful of states, though, and loan amounts vary by state.

Banks

Some large banks like U.S. Bank and Citibank offer personal loans with starting amounts of $1,000 or $2,000. Others, including Discover and Wells Fargo, have starting amounts of $2,500 or above. Banks typically prefer borrowers with good or excellent credit.

Some of the nation’s largest banks offer small-dollar loans. Here are a few examples:

• The U.S. Bank Simple Loan is offered in amounts from $100 to $1,000 and is repaid over three months. The loan’s fee is $6 for every $100 borrowed.

• Bank of America’s Balance Assist provides loans up to $500 and is repaid over three months. The loan carries a flat $5 fee.

• The Wells Fargo Flex Loan is a short-term small loan that’s repaid in four monthly installments, according to the bank. Loans can be $250 with a $12 fee or $500 with a $20 fee.

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

How to compare small loans

Here are the most important features to compare between small loans.

APR: Annual percentage rate provides an apples-to-apples cost comparison for all loan types. The least expensive 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 show you what rate and repayment term you’d 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 longer repayment term may mean you’ll pay more in interest, so find a term that keeps payments low but helps you clear the debt quickly.

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

Funding time: Personal loan approval and funding can take a couple of days or up to a week, depending on the lender and how smoothly the application process goes. If you need the funds fast, look for a lender that offers fast loans.

How to get a small personal loan

1. Review your credit report and debts. Before applying, check your credit report for opportunities to address any negative marks or unpaid debts. Also, calculate your debt-to-income ratio, which lenders use to see how much of a borrower’s income goes to other debts. 

2. Pre-qualify. Since pre-qualifying usually takes a few minutes and doesn’t affect your credit score, it’s a quick way to compare small loans.

3. Collect necessary documents. A loan application may require information like your Social Security number, W-2s and pay stubs. Gathering this information before you apply can speed up the loan application process.

4. Submit the application. This part may be done in person with local banks and credit unions, but many lenders have online applications. If you’re approved, expect funding within a day to a week. Applying will temporarily shave a few points off your credit score.

» GET STARTED: Check your personal loan rate on NerdWallet

How to qualify for a small loan with bad credit

If you have bad credit (a 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 of the lender’s range.

Here are some ways to improve your chances of qualifying for a personal loan:

• Add a 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 they will be on the hook if you fail to repay.

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

• Choose a lender that offers secured personal loans. Most lenders let you use a savings account or vehicle as collateral.

» COMPARE: See your bad-credit loan options

How to spot a predatory small loan

A small loan from a predatory lender can damage your finances and trap you in 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 can 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 repay them on your next payday — usually in two weeks or less. These loans require a balloon payment (all or most of the loan repaid at once) and may not give you enough time to pull the funds together.

» MORE: Alternatives to payday loans

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

Expensive refinancing options: Some high-interest installment lenders offer refinancing options that may lower your monthly payment, but because of high rates and extended terms, this option could keep you in debt for longer and cost you much more in interest.

No credit checks: A lender that approves you without checking your credit isn't trying to ensure that you can repay the loan and may even be betting that you can’t, which could lead you to borrow more money to pay off the first loan.

» MORE: How to spot a personal loan scam

Alternatives to small personal loans

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