If you need to borrow cash to cover home improvement projects, medical bills, debt consolidation or an unexpected expense, personal loans are a popular choice. Many people look to personal loans when they want to fund a large expense because they typically come with lower interest rates than other financial products, like credit cards.
Here’s where to find a $5,000 personal loan and how to qualify for one.
- Where to get a $5,000 personal loan
- What credit score do you need for a $5,000 loan?
- What is the monthly payment on a $5K loan?
- Comparing $5K personal loan lenders
- How to apply for a $5,000 personal loan
- Personal loan FAQs
Although a $5,000 personal loan may be necessary to help you overcome a challenging financial situation, it’s considered a low loan amount by most lenders. You shouldn’t have trouble finding multiple lenders offering $5K personal loans so it’s important to compare their diverse interest rates, fees, and terms.
Online lenders are convenient because they typically allow you to complete the entire borrowing process online, from application to funding. They also tend to offer quick funding — often within one to three business days of approval. Interest rates tend to be lower with online lenders since they don’t have the costs associated with maintaining brick and mortar branches.
Visit Credible to see your prequalified personal loan rates from various lenders, without affecting your credit.
One of the first places you can seek out a personal loan is at a traditional financial institution like a bank. Not only might your bank offer personal loans, but as an account holder, you may be eligible for lower interest rates or special promotions.
Similar to banks, credit unions might also offer personal loans for $5,000. Unlike banks, you must be a member of the credit union to be eligible for a loan. Because credit unions are not-for-profit organizations, they may offer better interest rates and terms. Check with credit unions near you that offer $5,000 personal loans, and ask if you need to become a member to qualify.
Borrowers with good to excellent credit scores have a better chance of getting accepted for a personal loan than those with poor and fair credit scores. A credit score of 600 or above should be enough to qualify for a $5,000 personal loan from many lenders.
Some lenders will work with borrowers with scores lower than 600, but they might offer a higher interest rate with stricter terms, or require a cosigner. Because lenders consider factors like income, debt-to-income ratio and prior repayment history when determining your eligibility, it’s wise to improve your credit score if possible before applying for a personal loan.
You can use a resource like AnnualCreditReport.com to check your credit for free. If you find any errors in your credit report, be sure to dispute them with the appropriate credit bureaus to potentially improve your credit.
How to get a $5,000 loan with bad credit
Borrowers with bad credit can still qualify for a $5,000 personal loan with certain lenders, but the loan will probably come with a higher interest rate. Thankfully, there are steps you can take to increase your chances of securing a $5,000 personal loan.
Improving your credit is one of the most effective ways to increase your chances of getting approved for a loan. You can do this by paying down existing debt, making payments on time, and disputing errors on your credit report. You can also get a cosigner with good or excellent credit for your loan, but keep in mind that cosigning makes them legally responsible for your debt if you’re unable to keep up with payments.
Credible makes it easy to compare personal loan rates from various lenders, so you can find one that works best for your needs.
The monthly payment amount on a $5,000 personal loan will depend on factors like your credit score, the interest rate and the repayment terms. Let’s compare how different interest rates will affect your monthly payment if you take out a $5,000 personal loan with a one-year term:
- 30% interest rate: A monthly payment of $487 with $849 overall interest accrued.
- 25% interest rate: A monthly payment of $475 with $703 overall interest accrued.
- 20% interest rate: A monthly payment of $463 with $558 overall interest accrued.
- 15% interest rate: A monthly payment of $451 with $415 overall interest accrued.
Now let’s see how that compares with a two-year term:
- 30% interest rate: A monthly payment of $280 with $1,710 overall interest accrued.
- 25% interest rate: A monthly payment of $267 with $1,405 overall interest accrued.
- 20% interest rate: A monthly payment of $254 with $1,107 overall interest accrued.
- 15% interest rate: A monthly payment of $242 with $818 overall interest accrued.
On a one-year term, even an increase of only 5% interest will result in you paying significantly more in interest over the life of the loan. If you choose a two-year term, you’ll lower your monthly payment, but double the interest accrued.
A personal loan calculator can help you understand how different interest rates and loan terms will affect your monthly payment amount and overall cost.
Ultimately, you need to choose a personal loan lender who can help you responsibly meet your current and future financial goals. All lenders are different and may not extend the same loan offers. Because even slight changes in an offer can save you hundreds of dollars in interest over the life of your $5,000 personal loan, it pays to shop around.
Here are some things you’ll want to consider as you compare loan options.
- Loan amount: Loan amounts will vary by lender so it’s important to shop around. Don’t borrow more than you actually need, and be cautious about payday loans as they often have higher interest rates.
- Repayment term: Longer repayment periods typically have lower monthly payments, but higher overall interest costs. Shorter repayment periods typically have higher monthly payments with lower interest costs.
- Interest rate: This additional cost to borrow the loan will be determined by your unique financial situation. Keep in mind that smaller interest rates with longer terms may cost more over time than short term loans with slightly higher interest rates.
- Fees: Your lender may charge additional fees associated with your loan. These could include origination fees, application fees, late repayment fees or early payoff penalties.
- Funding time: Lender funding periods may range from the next business day to a week later. Depending on how soon you need the loan, it may heavily impact your lender decision.
If you’re ready to apply for a personal loan of $5,000 or more, follow these five steps:
- Consider all of your options. If you only need a small amount of money, a personal loan might not be the best choice. Consider all options, including opening a new credit card with a 0% APR incentive, before choosing a loan.
- Check your credit status. Lenders will assess your credit score to determine your interest rate and application approval. Checking your credit status prior to applying allows you to resolve disputes and make improvements if necessary.
- Compare lenders. Each lender’s interest rate and term offer will be different. Comparing lenders allows you to select the option that best meets your needs.
- Complete the application. Once you’ve chosen a lender, you’ll need to complete your application. You’ll typically need to turn in certain documents like tax returns and pay stubs.
- Receive your funds. When your application is approved, the lender will have you sign the loan so the funds can be released to you. This period could range from the next business day to up to a week.
Check out these answers to some frequently asked questions about personal loans.
What can you use a personal loan for?
You can use a personal loan for a variety of purposes including paying off medical bills, completing home improvements, making large personal purchases like home appliances, financing a vehicle purchase, paying off an emergency expense or funding moving expenses. You cannot use a personal loan to pay for tuition expenses or business expenses. For those, you’ll need either a Small Business Loan or an academic loan.
How much can you borrow with a personal loan?
Personal loan amounts are set by the lender. Some lenders provide personal loans as low as $100 while others may allow borrowers to take out $100,000 or more. However, just because a lender offers a loan amount, that doesn’t mean they extend these loan amounts to all borrowers.
What’s a personal loan origination fee?
A personal loan origination fee is what a lender charges to cover the expenses associated with offering the loan. Personal loan origination fees may range from 1% to 10% or more depending on the lender. However, not all lenders charge origination fees.
APR vs. interest rate: What’s the difference?
The interest rate is a percentage of the loan amount that you repay as a cost of borrowing a loan. The annual percentage rate, or APR, is the total cost of borrowing the loan. The APR includes the interest plus other fees and expenses. Some lenders may charge origination fees or application fees which are included in the total APR.
To see what rates you may qualify for, use Credible to compare personal loan rates from various lenders.