A $5,000 online personal loan is well suited for a debt consolidation loan to clean up credit card bills, car loans, medical expenses, and school expenses or to start a new business venture. Business loans are treated a bit differently than personal loans, but can be a great option for cashflow.
When monthly expenses overtake our monthly income and savings account or you've been hit with unexpected bills, an emergency or went on a spending spree that you’re still trying to deal with. A personal loan can help you when you are faced with these situations.
Another consideration is a credit card with a 0% balance transfer option. Consolidate Your Debt With A Balance Transfer | 0% APR For Up to 18 Months provides an excellent way to save some money on interest payments if you have good to great credit.
There are great options for online personal loans and peer-to-peer loans on the Internet today. These loans can be very competitive ranging from $1,000 to $100,000 and it’s very simple to apply. In most cases, funds are placed in your bank account within 24 to 48 hours. Also, many online lenders have an option of using a co-signer if your credit score has been tarnished.
The best part of an online personal loan is that they are very fast. Fill out the application and should have an answer back in minutes. Like most things that are fast, take a step back and take another look at the cost of this type of loan.
Who will qualify?
If your credit score is above 600, you will probably qualify. Other qualifications from most lenders are a fulltime job, over 18 years old and an American citizen. Check each online lender’s criteria before applying. Not all lenders operate in every state. There will be times that you are not approved because that lender does not operate in your state and you will think it’s a problem with your credit. It may just be that the lender does not operate in that state. In the "Find Your Next Loan Get connected with the best lenders right here" feature offered on America Loan Service page, the service is designed to sort the product offering by the state as well as credit score. If the company does not offer the service in your state, it will not appear in the offer.
Unable to Quality?
If you are unable to qualify, search your free annual credit report and make sure everything on your report is as you’ve expected. If you are declined, take measures to improve your credit before applying for more loans and get your credit score above 600 as a minimum.
Interest Cost Comparison
Online lenders, banks, and credit unions make their money from interest charges and service fees. This is a quick comparison of interest costs by credit score for a $5,000 online personal loan. This is interest only and does not include service fees as they vary by provider.
The Value of a Good Credit Score
This chart was designed to breakdown interest by credit score. The good news with a personal loan in comparison to paying the minimum payment on a credit card, the debt is eventually paid off.
36 Month Term Personal Loan
|Interest Rate||Loan Amount||Credit Score||Monthly Payment||Loan Interest||Total Repayment|
See Personal Loan Calculator below
Interest Rate charged by Credit Score
The interest rate offered to you for an online personal loan will be based on the amount of risk a lender is willing to take based on your credit score, work history and education. A higher credit score will provide more lenders offering you money, longer payment, better terms and a lower interest rate.
21 Month Interest-Free Balance Transfer 0% Credit Card
If you are considering debt consolidation, a 21 month 0% balance transfer credit card is an excellent way to clear high-interest expense rather then taking out a personal loan and paying interest now. The Citi® Diamond Preferred® Card are available for good and excellent credit. This credit card option provides an excellent way to reduce interest expense and pay off the debt over the 21-month term. If you still have debt remaining after 21 months, apply for a debt consolidation personal loan.
18 Month Interest-Free Balance Transfer 0% Credit Card
If you have fair credit and considering debt consolidation, an 18 month 0% balance transfer credit card is an excellent way to clear high-interest expense instead of taking out a personal loan and paying interest now. You will also receive 0% interest for 6 months on purchases.
Are There Any Restrictions On What A Online Personal Loan Can Be Used For?
Most online lenders do not list restrictions on loan usage, although many lenders will ask what you are using the money for.
Online Lenders Terms of Service
Finding the Best Online Personal Loan
Finding the best online loan will depend on the amount of capital you require, your credit score, work/education history and your current debt to equity ratio.
Online Lenders Cater to Specific Credit Scores
Pros of Unsecured Personal Loans
Most online lenders offer unsecured loans. An unsecured loan does not require you to use your assets as collateral and you will receive your money very quickly. An unsecured loan can offer highly loan amount than secured loans. Yes, higher. The secured loan will be limited to the asset you are securing. An unsecured loan is a lot easier for the lender to prepare. Less paperwork and less documentation. The lender does not have to appraise your asset to determine a loan value.
Cons of Unsecured Personal Loans
The downside of unsecured loans is that the lender has to take on more risk and this could cost you by having to pay higher interest rates. You will damage your reputation and credit rating if you default. A secured loan usually provides a lower interest rate.
Personal Online Loan Documentation
The information required to apply online or at a bank/credit union is similar. To save yourself some time before you apply, here are the questions you will be asked on most loan applications.
The online personal loan and peer-to-peer lenders with ask for the following information, some will vary slightly:
- • The amount of money you would like to borrow
- • What the loan will be used for
- • Your credit score
- • Date of birth
- • Military history
- • Current drivers license
- • Social security number
- • Are you an America Citizen
- Zip code
- Telephone number
- Email address
- • Employment history
- • Employer contact information
- • W-2 for proof of employment
- • Depending on the type of funding, they may want the days of the month that you are paid. (This is typical with short-term loans)
- • Government/state I.D.
- Lenders will require your banking information including your routing or ABA number on your checks. (This is the first 9 digits on your check)
- Your account type, (checking or savings)
- • Bank account number
- •Most current bank statement
- Zip code. (if you have a 4 digital zip and its telling you that it does not work, add a 0 to the front of the number)
- Void Check for auto withdrawal from your checking account
- Bank name and how long you’ve been with the bank. The address of the bank may also be required
You can usually get all of this banking information from your check or bank statement
How Much Can I Borrow?
The amount you can borrow online will depend on your credit score, work history, education and if you want a secured or unsecured loan. Here is a breakdown.
The breakdown of the amount you can borrow from most lenders will depend on your credit score and work history. The amounts we are using come from our own research based on the lenders we’ve worked with over the past 10 years. Consider this only an estimate. Online lenders will vary slightly on how they determine their lending criteria.
Here is a quick breakdown:
Online loan amount estimates by credit score:
- under 600 $100-$5,000
- 600-659 $3,500-$25,000
- 660-700 up to $50,000
- 701-850 up to $100,000
If you have the assets like a home or auto that is paid off, we recommend you check your options. It will take a bit of time to have your property or vehicle appraised but you should be offered a better interest rate when the lender has your assets for security. The amount you can borrow will be a percentage of the value of your asset.
Personal Financial Statement
Some lenders will require a breakdown of your debt in comparison to your annual income to see if you can manage your payments. The lenders will want to know if you can afford the new monthly payment with your current monthly expenses.
The personal financial statement is also referred to as the net worth statement and debt to equity. It explains your income and assets on one side and your debt on the other side of the page. It provides you and the lender a snapshot of your wealth at a moment in time and acts as a measurement of your financial wellbeing. This is a great tool to complete every year for yourself to see if you’re headed in the right direction. The goal of completing this financial statement will be to see if you have the ability to repay the loan your requesting.
When you start looking for a Loan, these are some of your options.
Meeting with your bank is a good place to start. Explain that you want to apply for a loan and you have already completed a personal financial statement. Have a copy of your income from last year on hand for easy reference. Your bank already knows you and your financial history. They will ask you all of the questions all of the others lender with want to know as well. It’s a safe place to start. If your current bank will not loan you the money, you are now prepared to go to any other lender.
It is ok to move onto another lender and use what you have learned from this first attempt to strengthen your loan application.
2) Credit Unions
Credit unions are another avenue where you can look for a personal loan if you’ve not been approved by your bank. Differing from banks, credit unions are non-profit organizations that are owned by individuals who function as a cooperative unit. Often enough, they are willing to help approve loans for bad credit borrowers, when other institutions are not. If this is an option you want to consider, you can look up credit unions in your area and compare their interest rates and fees.
3) Online Personal Loan Provider
Many personal lenders are considered online banks. They offer fees and interest rates comparable to the banks and credit unions.
4) Peer-to-Peer Lender
If you are unable to obtain a loan from a bank or credit union, a great alternative is a Peer-to-Peer Lender. This is an online lender providing capital from individuals instead of a traditional bank. Peer-to-Peer lenders do offer competitive interest rates. This lender will pull your credit rating but are often more flexible with providing loans if you have fair or poor credit.
The greatest benefit of a co-signer is the person co-signing may have a longer work history and/or better a credit rating. This will benefit you with a lower interest rate charge. Remember, your parent, grandparent or friend is on the hook if you default.
6) Rebuilding Your Credit
Sometimes, you will hit a wall and not be able to secure the loan you want right away. If this is the case, you may need to take steps to rebuild your credit score before you reapply. Make sure to pay all outstanding payments on time and at least pay the minimum balance. Since your credit rating is comprised of 35% of your payment history, it is important to stay on top of this. You may also choose to seek help from of a financial advisor or counselor to help you take further steps to improve your credit. There are a variety of these professionals in your city, who you can consult. As your credit score begins to rise, you will find more loan options are available with better interest rates.
7) Installment Loans with bad credit
You can seek out an installment loan if you require a small personal loan usually under $1,000. Installment lenders provide short-term loans to individuals, despite their credit scores with extremely high interest rates. You can borrow a lower amount of money for a timeframe of approximately one year.
Best online Personal Loan Option by Credit Score
Credit Score 600-680
This credit score group is very difficult to assess. There are lenders like LendingPoint that will lend up to $25,000 with a credit score as low as 600 while other lenders will consider a credit score of 649 poor credit. LendingPoint is one of few online lenders that offer 600 as fair credit.
Credit Score 700-850
In this credit score range, you will have all of the options available to you and interest rates around the 5% to 9% range with a strong monthly income.
Credit Score 400-600
There are a few lenders that will offer a loan with a credit score below 599. Many lenders that do offer loans below 599 do not use the FICO scoring system. They use other reporting agencies like DataX. Lenders will look at job history and the reason your credit score is at this level. The bad credit lenders that we have researched will lend up to $5,000.
Payday and Installment Loan
Payday and installment loans with interest rates reaching 1500% on payday loans and over 100% on installment loans. The rates are high because the payment term is short. Payday loans are meant to be a few weeks long. If you are forced to take an Installment loan to pay off payday or title loans, you can try this option.
Check out lenders for bad credit loans as well.
If you have a vehicle that is paid off or you have some equity built up in the vehicle, this can be used as an asset to secure a loan. We highly recommend that you stay away from car title loan providers that charge extreme interest rates.
Friends and Family Auto Loan
This is also a good time to talk to friends or family. Sign over your vehicle until the loan is repaid.
What to look for when Searching Online Personal Loan lender sites
- Fee schedule: Lenders have fees for items like origination fees, late payment fees, and prepayment penalties. What we see is the standard for many lenders is a maximum 6% origination fee, late fees around $25 or a 5% prepayment. Shop around, as many lenders do not have any of these fees
- Lenders will have all of these fees and schedules listed in their terms and conditions. The fees should also be highlighted when you apply for the loan
- When you go to the lender's site, you will see information on the lenders including third-party reviews and the better business bureau (BBB). Take the time to read these reviews and see what others have experienced with the lender
- With most lenders, they have you complete the amount of money you are looking for and they display of their site the minimum and maximum amounts they lend
- Make sure to check what state the lender operates in. You may apply and be turned down only because they do not operate where you are applying
Unsecured Personal Loans Comparision
Interest Rates and Understanding APR: APR is a combination of the interest rate that you're charged by the lender and any fees and other costs involved in procuring the loan. When you apply for any loan, find out what is charged (other than the interest) within the APR for fees.
Origination / Administration / Prepayment Fees: Some companies charge additional fees including fees for paying off your loan early. This can add up to a lot of money and can easily be avoided by dealing with lenders that are transparent with their fees. Ask the loan provider for a breakdown of their fee schedule, origination fees and any penalties for items like late payments or prepayment of the loan.
Personal Loan Limits: We were looking for choice in the amounts that lenders offer. We have found lenders from $1,000 to $100,000. If you require even more substantial loan amounts, look at secured loans that use the equity in your home to reach higher limits.
Loan Term: Lenders offer terms from 24 months to 84 months. Your interest cost will increase with a longer loan term, but it may be necessary when you require a more significant amount of capital, or you want a specific monthly payment to fit your budget.
Unsecured Personal Loans and Your Credit Score: You will see throughout the lender descriptions that the interest rate ranges from a low near 5.0% and a cap of 36% in many states. If your credit score is 750+ and you earn $80,000 / year, you'll find the lowest rates. If your credit score is 640 and you need $35,000, you will see interest rate offers closer to 25% and higher.
The greater the risk to the lender, the higher the interest rate. Remember that these loans are unsecured and the lender is lending from your work history, credit score and has no means of recouping their money through collateral. The lenders will charge higher interest to cover these potential losses. If your credit score is on the low side, we would recommend that you look at a secured loan.
Secured Personal Loans
- Usually a larger loan amount
- Access to capital can take longer if the asset used for security requires an appraisal.
Secured auto loans are processed quickly with lower interest rates because the vehicle secures the loan.
A home loan equity loan or Home Equity Line of Credit (HELOC) is an excellent option for higher loan amounts and you have the time to wait. For many people that have just purchased their home or if the equity is not available to secure a home equity loan, an unsecured personal loan can get the job done and it can be completed very quickly.
When to consider a Secured Loan and Line of Credit
Secured loans and lines of credit are protected against assets and provide the lenders the ability to increase the borrowing amount, lower interest rates and work with a lower credit score. The main advantage of a secured loan is that you can access more capital when you use an asset to protect the lender. Secured loans require collateral and the process can be longer as the collateral must be verified by the lending institution. This step can be well worth your time when you receive lower interest rates. If you need a larger amount of capital for debt consolidation or home repairs, you may want a Home Equity line of credit or secured loan. If you have a low credit score, the lender is usually more willing to lend you money as they have security that they could take to repay the loan.
Business Loan vs. Personal Loan
Wehn you're just starting your business, you may need to make a cash injection and the company does not have the backing yet to stand on its own. If your business in grossing over $50,000. annually, you can qualify for a loan using for business for security even with a poor credit score as low as 500.
Small business loans can be taken with your name as collateral for secured or unsecured loans.
- Understanding FICO Scores - Understanding FICO Scores acquired July 2018
- Effect of a Hard Inquiry on your Credit Score MyFICO - Effect of a Hard Inquiry on your Credit Score MyFICO acquired July 2018
- How to get a free copy of your credit report - How to get a free copy of your credit report acquired July 2018