Small Personal Loans for Bad Credit

Explore small personal loans for bad credit via zaving, offering tailored options despite credit challenges.

Last updated by Zaving Editorial Team, on January 19th, 2024

Are you in need of small personal loans for bad credit? If you need some urgent cash to get you through a tight spot, you can turn to zaving to help you explore your options. Our online service makes applying for a loan quick, easy, and hassle-free. If your loan is approved, cash can land in your bank account straight away – it's as simple as that! Start the application process right here today with zaving.

What are small personal loans and how do they work?

Small personal loans are modest-sized loans typically ranging from a few hundred to a few thousand dollars, providing a convenient solution for immediate financial needs. Unlike secured loans, these are unsecured and don't require collateral. You can obtain them from various sources, including banks, credit unions, online lenders, or other financial institutions.

To apply, you'll need to submit details about your financial situation and creditworthiness. Lenders evaluate factors such as your credit history, income, and employment status to determine eligibility. Upon approval, the loan amount is usually deposited directly into your bank account.

Repayment terms vary, but small personal loans often come with fixed monthly payments over a specified period, typically ranging from a few months to a couple of years. Interest rates can be either fixed or variable, depending on the lender and your credit profile.

These loans serve diverse purposes, from covering unexpected expenses like medical bills or car repairs to consolidating debt or making small purchases. It's important to manage these loans responsibly, making timely payments to avoid additional fees and interest charges.

How are small personal loans different from payday loans?

Small personal loans and payday loans both provide quick access to cash, but they differ significantly in terms, costs, and suitability for different financial situations.

Small personal loans are unsecured loans, meaning they don't require collateral. They typically range from $2,000 to $5,000 and are repaid over 12 to 60 months, with lower interest rates ranging from 6% to 36%.

Suitability: Small personal loans are better suited for larger expenses like debt consolidation, home repairs, or medical expenses. They are also ideal for borrowers with good to fair credit, as they offer more favorable terms.

Payday loans are also unsecured loans, typically ranging from $50 to $1,000 and repaid within 2 to 4 weeks. However, they carry exceptionally high interest rates, ranging from 391% to 782%.

Suitability: Payday loans are designed for short-term emergencies and borrowers with limited credit options. They should be considered a last resort due to their high cost and potential to trap borrowers in a debt cycle.

Key differences include:

  • Loan amount: Small personal loans offer larger loan amounts, while payday loans are restricted to smaller amounts.
  • Repayment term: Small personal loans offer longer repayment terms, allowing for manageable monthly payments. Payday loans have very short repayment terms, creating high-pressure repayment demands.
  • Interest rate: Small personal loans have significantly lower interest rates than payday loans, reducing the overall borrowing cost.
  • Credit requirements: Small personal loans typically require good to fair credit, while payday loans may accept borrowers with bad credit or no credit history.
 

The choice between a small personal loan and a payday loan depends on individual circumstances and financial needs. For larger expenses and borrowers with good to fair credit, a small personal loan is the more affordable and responsible option. For short-term emergencies and borrowers with limited credit options, a payday loan may be the only available option. However, it should be used as a last resort and only if the loan can be repaid in full by the due date.

Can I get a small personal loan with bad credit?

Obtaining a small personal loan with bad credit is a possibility, but it may require additional scrutiny and considerations. While your credit score plays a significant role in determining the interest rate you qualify for, there are lenders who focus on providing loans to borrowers with less-than-perfect credit histories. These lenders may conduct a comprehensive assessment of your financial situation, taking into account factors such as income stability, employment status, and overall financial health to determine your eligibility.

Bear in mind that having bad credit may limit your options or result in higher interest rates and stricter terms. 

Here are some tips for securing a small personal loan with bad credit:

  • Compare interest rates: Obtain quotes from multiple lenders to find the most favorable option. You can compare rates online or visit your local bank or credit union.
  • Be prepared to provide documentation: Lenders will require verification of your income and employment. Gather necessary documents like pay stubs, W-2s, and bank statements.
  • Consider a cosigner: If you have a friend or family member with good credit, they may be willing to cosign your loan, potentially leading to a lower interest rate.
  • Create a repayment plan: Before taking out a loan, establish a clear plan for repaying it. This will help you avoid missed payments and maintain a positive credit history.

More of your frequently asked questions about payday loans

How can I improve my credit score?

The speed at which you can secure a small personal loan is dictated by various factors, including the lender's processing methods, your creditworthiness, and the complexity of your loan application. Nonetheless, upon successful approval, you can generally expect to receive your loan funds within one to five business days.

How quickly can I get a small personal loan?

The speed at which you can secure a small personal loan is dictated by various factors, including the lender's processing methods, your creditworthiness, and the complexity of your loan application. Nonetheless, upon successful approval, you can generally expect to receive your loan funds within one to five business days.

Are there restrictions on what I can use my small personal loan for?

Small personal loans offer a versatile solution for financing, unlike dedicated loans like mortgages or car loans, which typically have strict usage restrictions. This flexibility allows borrowers to utilize the funds for diverse purposes, such as debt consolidation, medical expenses, home repairs, or addressing unforeseen costs. However, it's always advisable to consult with your lender regarding any potential limitations or specific terms associated with the loan.

How do I choose a small personal loan?

When selecting a small personal loan, evaluate your financial needs, compare interest rates from diverse lenders, focus on the APR, evaluate loan terms, check your credit, explore cosigning options, compare fees, carefully read the terms, and seek expert guidance if needed.