What's the Lowest Amount You Can Borrow When You Get a Personal Loan? | The Motley Fool (2024)

When you take out a personal loan, you'll need to decide how much to borrow. The loan amount is going to depend upon two things: what you’re spending the money on and how much your lender is willing to give you.

Lenders typically have both loan minimums and maximums. This means you can't borrow too much or too little. That can make borrowing low amounts tricky. Look for lenders who offer you the following on micro loans:

• Competitive rates: Keep interest payments low.
• Flexible amounts: Borrow the minimum necessary to achieve your financial goals.

Below you'll find more information on the least you can borrow with a personal loan.

What's the lowest amount you can borrow with a personal loan?

Generally, $1,000 to $5,000 is the lowest amount you can borrow from most personal loan lenders. But lenders write their own rules, so this can vary a lot.

Because there is so much variation, your best bet is to shop around and check rates and loan terms from multiple lenders. You should be able to find a lender that is willing to loan you what you need, so long as you have reasonable credit and borrow more than $999.99.

Benefits of keeping your personal loan balance as low as possible

It typically benefits you to borrow the minimum needed to accomplish your financial goals. Here's why:

• You'll pay less in interest over the life of the loan.
• It's easier to get approved for a small loan.
• You'll have smaller monthly payments.

When considering how much to borrow, start with the minimum you need to achieve your financial goals. That way, you won't overpay when consolidating debt or financing a purchase.

What if your chosen lender has a higher minimum loan balance than you need?

Need a micro loan? Your choice of lenders may be limited. And those lenders may not offer the low interest rates you were hoping for.

If you find yourself in this situation, consider choosing the lender with the best terms, even if you need to borrow a little more than strictly necessary.. But only do this if you can immediately repay the extra money you borrowed.

For example:

If you want to borrow $1,000 and the lender you prefer offers $5,000 loan minimums, it may make sense to borrow the full $5,000 you need to qualify for a loan and immediately repay $4,000.

But read the fine print! Some lenders have prepayment penalties, which are fees you must pay for repaying loans before they're scheduled. These fees make it harder to borrow small amounts cheaply..

If you prepay $4,000 in principal because you borrowed more than necessary, your monthly payments may remain elevated even though you owe less. You'd pay off the loan faster, but your costs wouldn't necessarily change.

Becoming debt-free fast is great for your wallet, but even if you immediately repay some debt, you'd still be stuck with pricier rates. Ideally, you'd get a small loan at a small-loan rate.

Be smart about how much you borrow

Best-case scenario, you find a lender that lets you borrow the minimum you need, will charge you a reasonable monthly payment, and offers good terms. Just be sure not to borrow more than is necessary to accomplish your goals. Compare top personal loans to find the best deal so you don't overpay.