Small Personal Loans and Your Credit

Small Personal Loans and Your Credit
Amy Fontinelle
on March 20, 2020
Read in 1 min

If you don’t have a few thousand dollars in savings, there might come a time when an important expense pops up that you can’t afford.

Fortunately, there’s an easy option to borrow the money you need.

What is a small personal loan?

A small personal loan is an unsecured loan for less than $3,000.

You can use the money for a variety of purposes: paying a medical bill, fixing your car, repairing your plumbing, or even going on a vacation—though it isn’t recommended to borrow for nonessential purchases.

Some consumer-friendly small personal loans have fixed monthly payments with no balloon payment and require full repayment within 3 to 12 months.

The better your credit, the lower your interest rate could be.

What is the difference between small personal loans and other loans?

Unlike a credit card, personal loans are designed to be repaid within a short period so you can get out of debt fast.

And with a personal loan, you’ll know up front what your total borrowing cost will be.

If you borrow $1,000 at 10% interest (fixed) and repay it over 12 months, you’ll pay $55 in interest, plus any fees.

Your lender might charge an origination fee—a processing charge for taking out the loan—and you might get charged if you pay late.

If you repay the full loan early, you could pay less interest. Some lenders try to compensate with a prepayment penalty.

Shop around before deciding: you can find lenders that won’t penalize you for getting out of debt fast.

What are the advantages and disadvantages of small personal loans?

A big advantage of small personal loans is that they limit your risk.

Small personal loans are unsecured. There’s no collateral, like a car or house, that the lender can seize if you don’t pay.

And if you make all your payments on time, you should see a boost to your credit score.

The biggest disadvantages of small personal loans are the interest you pay and the amount of time it takes to shop around and apply for the loan.

And interest rates on unsecured loans are usually higher than those on secured loans because the lender is taking on more risk.

Small personal loans are available from some banks and credit unions. If you’re looking for a potentially more convenient option, online lenders also offer small personal loans.

If you need to cover an important expense and you want to avoid credit cards, a small personal loan is a choice to consider. LendGenius is not a lender but we provide one simple form that can connect you with a lender in minutes.

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Disclaimer: This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.

Amy Fontinelle Finance Journalist

Amy Fontinelle is a writer, editor, and personal finance expert.

Her articles have appeared at Investopedia, Bankrate,, The Simple Dollar,, Yahoo,,, Bankaholic,, Saving Advice and other sites.

Amy’s clients include personal finance websites, financial institutions, public policy organizations, academic journals, and professional economists.

Important Disclosures. Please Read Carefully.

Persons facing serious financial difficulties should consider other alternatives or should seek out professional financial advice. This website is not an offer to lend. is not a lender or lending partner and does not make loan or credit decisions. connects interested persons with a lender or lending partner from its network of approved lenders and lending partners. does not control and is not responsible for the actions or inactions of any lender or lending partner, is not an agent, representative or broker of any lender or lending partner, and does not endorse any lender or lending partner. receives compensation from its lenders and lending partners, often based on a ping-tree model similar to Google AdWords where the highest available bidder is connected to the consumer. Regardless,’s service is always free to you. This service is not available in all states. If you request to connect with a lender or lending partner in a particular state where such loans are prohibited, or in a location where does not have an available lender or lending partner, you will not be connected to a lender or lending partner. You are urged to read and understand the terms of any loan offered by any lender or lending partner, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you. By submitting your information via this website, you are authorizing and/or lenders and lending partners in its network or other intermediaries to do a credit check, which may include verifying your social security number, driver license number or other identification, and a review of your creditworthiness. Credit checks are usually performed by one of the major credit bureaus such as Experian, Equifax and Trans Union, but also may include alternative credit bureaus such as Teletrack, DP Bureau or others. You also authorize to share your information and credit history with its network of approved lenders and lending partners. For qualified consumers, our lenders offer loans with an Annual Percentage Rate (APR) of 35.99% and below. For qualified consumers, the maximum APR (including the interest rates plus fees and other costs) is 35.99%. All loans are subject to the lender’s approval based on its own unique underwriting criteria. Example: Loan Amount: $4,300.00, Annual Percentage Rate: 35.99%. Number of Monthly Payments: 30. Monthly Payment Amount: $219.36. Total Amount Payable: $6,581.78 Loans include a minimum repayment plan of 12 months and a maximum repayment plan of 30 months. In some cases, you may be given the option of obtaining a loan from a tribal lender. Tribal lenders are subject to tribal and certain federal laws while being immune from state law including usury caps. If you are connected to a tribal lender, please understand that the tribal lender’s rates and fees may be higher than state-licensed lenders. Additionally, tribal lenders may require you to agree to resolve any disputes in a tribal jurisdiction. You are urged to read and understand the terms of any loan offered by any lender, whether tribal or state-licensed, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

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Late Payments Hurt Your Credit Score

Please be aware that missing a payment or making a late payment can negatively impact your credit score. To protect yourself and your credit history, make sure you only accept loan terms that you can afford to repay. If you cannot make a payment on time, you should contact your lenders and lending partners immediately and discuss how to handle late payments.