How to Get Fast Small Loans to Build Credit

Are you looking to build your credit for a big purchase like a house or car later down the road? Increasing your credit score makes those loans more accessible. However, if many big-ticket loans feel out of reach, you can get started with a small loan and use that resource to build your credit score.

Small loans can give you strong momentum on your credit-building journey, but you shouldn’t rush to accept the first loan you see. Some small loans have competitive rates and terms, but it is important to distinguish these reasonable loans from predatory payday loans. Discover how to get fast small loans to build credit without putting your credit score in harm’s way. Building credit can help you score lower interest rates and higher loan amounts when you need to borrow money. 

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PRO TIP! A good credit score can lead to lower interest rates and increased borrowing power on loans and credit cards. MoneyLion offers a free and convenient way to find offers from our trusted partners to help you improve your credit.

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What are fast small loans?

 Some of the small loans that you can get quickly are payday loans. These loans are quick and accessible but could be predatory and expensive. Predatory lenders are known to target borrowers with low credit scores who cannot repay the loan in time. These loans have easy requirements, but borrowers end up paying far more than the loan’s value due to high interest rates and fees.

Some loans have similar properties as payday loans, such as small amounts and quick approval. However, some of these loans have more competitive interest rates and terms, which make them far more reasonable to pay back over time. Make sure to do your research since not all loans are created equal. 

Why are fast small loans so popular?

Fast and small loans, like payday loans, are attractive because they often don’t require credit checks. You don’t have to worry about losing points on your credit score or fulfilling a minimum credit score requirement to get a loan. 

Payday loans are also popular because they are very quick and convenient. However, most have excessive interest rates and fees can result in you paying far more than the loan’s principal. These loans can keep people in debt, but you don’t have to resort to a payday loan. Keep reading for other options.

Where can I get a fast small loan?

Payday loans aren’t your only option. There are many places to get a small loan. 

1. Personal loans from an online bank or financial app 

Online banks and/ or financial apps often offer reliable access to loans. You can get low interest rates and competitive offers, and many online banks have more generous requirements (i.e., minimum credit score and debt-to-income ratio). Some financial institutions (especially traditional banks) tend to have the lengthiest loan approval processes but online banks/ financial apps usually have application processes and some even disburse the loan within 24hrs. 

MoneyLion can help you find personal loan offers based on your background and the info you provide.  You can get matched with offers for up to $50,000 from top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

2. Get a loan from your credit union

Your local credit union probably has some loans available. Some of these credit unions have small loans with reasonable rates and terms. 

3. Consider a credit builder loan

A credit builder loan allows you to build credit without a hard credit check. The lender asks you to make a security deposit equal to the loan’s principal. You then receive the security deposit back after paying off your loan. 

4. Pawn something at the local pawn shop

You can give an item of value to your local pawn shop and receive cash for it. The pawn shop holds onto the item until you pay it back. However, if you do not pay quickly enough, the pawn shop can claim ownership over the item you pawned off.

5. Borrow money from a friend or a family member

Borrowing money from a friend or family member can give you access to the best terms and a quick turnaround. You should explain to your friend or family member how you intend to pay them back. Borrowing money without paying it back can damage relationships. It’s important to take it very seriously if you borrow money from a family member or friend.

6. Become an authorized user on someone else’s credit card

You won’t get a fast loan with this strategy unless the primary cardholder lets you use their credit card. A common result of this strategy is building your credit score through the cardholder’s payment history. Adding points to your credit score with this strategy can help you receive better loans since you have a higher credit score.

7. Obtain a secured credit card

A secured credit card requires a security deposit. This security deposit becomes your credit limit. You won’t have as much room to overspend if you make the minimum security deposit, and these cards don’t have the best rewards programs (if any at all). However, these cards are easily accessible, regardless of your credit score. That is the key strength of secured credit cards, and you can eventually upgrade to an unsecured credit card (a traditional credit card).

Lending criteria for a small personal loan

The lending criteria vary for traditional personal loans and payday loans. Understanding the requirements can help you position yourself for more loan options and discover which alternatives you qualify for.

Payday loan criteria 

Here is the process of securing a payday loan. This way, you can understand what you will be handing over to a payday loan company. 

• Payday loans come with a simple application process. There are unusually no credit checks necessary when you apply for a payday loan. 
• You may be asked to provide the payday loan company with access to your bank account. And some may ask for authorization to pull a payment when it’s due, but you can revoke this. 
• From there, you sign a document detailing the terms, which could have a high-interest rate. It requires quick repayment.
• Payday loan companies often ask for a post-dated check with payment in addition to the interest that the loan accrued. This way, they can cash the check from you as soon as you get paid. 
• Your payment towards the loan typically coincides with your payday. 
• You’ll either pay off the loan or fall into the trap of the debt cycle by only paying interest, keeping the loan open, and accruing even more interest. 

Personal loans from traditional banks and financial institutions

Some traditional personal loans often come with more defined criteria that you must meet to qualify. Here’s what you can expect.

• Credit score and payment history: Your credit score represents your ability to pay off debt, the amount of debt you have, and your financial history. This is the most essential part of the loan application. Typically, lenders require a credit score over 600, but that isn’t always the case, and you might be able to get a loan without any credit history at all. 
• Income: You need to prove that you have a steady stream of income. The lender may ask for pay stubs or tax documents to verify your income. Proof of income shows the lender that you have the means to repay your loan. 
• Debt-to-income ratio: Lenders offering traditional personal loans look at your debt-to-income ratio. Each lender’s requirements differ, but essentially, lenders want to see that your debt doesn’t outweigh your income. 
• Collateral: Traditional lenders may ask you to list collateral on your application. Collateral represents assets you give to the lender if you cannot pay off the loan.
• Origination fees: You may have to pay an origination fee when you obtain a loan.

Build Credit with Small Loans

Small loans give borrowers the opportunity to make on-time payments and improve their credit scores. Your credit score is one of the most important financial metrics that impacts which types of loans you can access in the future. Getting a mortgage or an auto loan with a lower interest rate can help you save thousands of dollars over your lifetime. Small loans can act as the building blocks for a good credit score.

Get the Cash You Need

A fast, small loan can help when you are in a financial pinch. You can use these funds to cover an emergency expense and cover the loan on your next payday. However, you should avoid payday loans because of their high interest and quick repayment requirement. Seeking alternatives while raising your credit score over time can help you save money and access more capital.

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