You can get a personal loan for a variety of uses, whether you’ve encountered an unexpected expense, want to consolidate existing debt, or you’re looking to make some home improvements. While you can borrow as much as $50,000 or more with a personal loan, you can also borrow small amounts.
If you’re looking to borrow a smaller amount, you may need to shop around to find a lender with a lower loan limit. Here’s a rundown of how to get a $3,000 personal loan and what you’ll need to qualify.
Personal loans aren’t reserved for massive expenses or big emergencies. You might find yourself in a situation where you only need a smaller personal loan.
The process of getting a small personal loan is similar to taking out a larger loan. You’ll generally need to follow these steps:
- Check your credit score. First and foremost, it’s helpful to know where your credit stands. This usually means requesting a copy of your credit report from each of the three credit bureaus, and checking your credit score. You can get a free copy of your credit report weekly through the end of 2023 with AnnualCreditReport.com. The better your credit, the less risk you pose to a lender, and the more likely you are to get approved for your loan. Taking out a personal loan with a 550 credit score will be more difficult (and more costly) than taking out a loan with a 700 credit score.
- Compare small loan lenders. Shop around and compare at least three lenders that offer small personal loans. Be sure to consider the costs of that loan, including any fees and the interest rate. It’s also important to compare repayment terms to ensure you can repay the loan on time. Most personal loans have repayment terms between one and five years.
- Select a loan and apply. After comparing a few loan options, choose the one that works best for your situation and apply. You can usually complete this process online. During the application process, the lender will typically ask for personal information (such as your contact info and address), and documentation to verify your income (like pay stubs or tax returns).
- Accept the loan and await your funds. If the lender approves your application, you’ll need to sign to accept the loan. Most lenders will deposit the money into your account within one to five business days.
Related: Learn more about getting a personal loan on Credible.com
If you’re looking for a $3,000 personal loan, you may find that not all lenders fit the bill. Some lenders may only offer loans starting at $5,000 or higher, so you’ll need to shop around to find a lender that fits your needs.
You have three types of lenders to consider: online lenders, traditional banks, and credit unions. The one that’s right for you depends on factors like your credit score, location, and whether or not you have an existing relationship (such as a bank account) with any of these financial institutions.
Here’s a closer look at each of these three options:
Because online lenders don’t have the overhead costs associated with maintaining a physical branch, they typically offer competitive interest rates and terms on their products, and they have a more streamlined process that can be completed online. You can receive funds as soon as the same business day, depending on the lender.
Related: Learn more about getting a personal loan on Credible.com
Traditional banks usually have brick-and-mortar branch locations that you can visit if you prefer in-person customer service. You may still be able to apply for a personal loan online and get funds disbursed without ever visiting a branch location. However, if you want to speak with a loan agent in person or need help managing your loan once it’s been funded, visiting a branch location can be beneficial.
Credit unions are not-for-profit and member-owned institutions. This allows them to offer lower rates on various financial products, including personal loans, so you can save money if you’re a member (or become one). However, credit unions sometimes have strict criteria for who can become a member, so you may not be able to join the credit union you’re interested in.
Each lender has its own eligibility criteria for personal loans. These requirements can vary, but in general, you must have a:
If you aren’t able to meet these limits, a lender may not approve your application. In some cases, you may be able to add a cosigner with a strong credit score to your loan application. This can improve your chances of getting approved for a loan, and can help you qualify for a lower interest rate. Just keep in mind that your cosigner will be responsible for repaying the loan if you can’t make your payments, which could potentially harm your relationship.
It’s usually easier to get approved for a smaller personal loan, even if you have a lower credit score. However, you still need to meet certain criteria in order to qualify. If you have bad credit or no credit history, you might not be able to get a personal loan.
Most personal loans are unsecured, which means that you don’t have to put up any collateral (like your car) for the loan. These loans are riskier for lenders, since you’re not backing up your loan. If you can’t qualify for a $3,000 personal loan on your own with your current credit score — and you don’t have someone who can be your cosigner — you might want to consider a secured loan instead.
With a secured loan, you offer an asset to the lender (such as your home), and the lender can seize that asset if you’re unable to repay your loan. This is much riskier for you as the borrower, since you could lose your property in the event that you fail to repay your loan. Be cautious when considering secured loans.
While pawn shop or title loans are another option for borrowers with bad credit, you should avoid these loans if at all possible. They have astronomical annual percentage rates (APRs) that average 200% to 300%, and they typically have very short repayment terms.
If you have the time to improve your credit score before taking out a loan, that may be a better strategy. By building up a solid payment history, reducing your debt-to-income ratio, and disputing any credit report errors, you can potentially raise your score and get approved for loans with better interest rates and terms.
While taking out a small loan of $3,000 might not seem like a big deal, there are advantages and disadvantages to consider first.
A $3,000 personal loan may sound like a great idea, but it’s not the right option for everyone. Consider if you’ll realistically be able to make the payments on it — the last thing you want to do is end up with more debt.
Related: Learn more about getting a personal loan on Credible.com