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- Small loans can be harder to get than some larger loan amounts.
- A $2,000 loan can help with expenses such as debt consolidation, medical bills, and car payments.
- You may still be able to take out a loan with bad credit, but you would pay a higher interest rate.
Introduction to $2,000 loans
A $2,000 loan can help with anything from debt consolidation to moving expenses, medical bills, and car repairs. While it might seem counterintuitive, you could possibly find it more difficult to get a small personal loan than a larger one. That's because smaller loans are less profitable, causing many lenders to steer clear of them.
However, there are some financial institutions that do offer personal loans for small amounts. If you're in need of a bit of extra cash, here's how you can secure a $2,000 loan.
Eligibility criteria for a $2,000 loan
Banks, credit unions, and online lenders offer loans of varying amounts for a variety of purposes. But in order to get approved, you'll need to meet your lender's qualification requirements.
Credit score and history
Lenders often want your credit score to be in at least the mid-600s. They'll also review your credit history for possible "red flags," such as late payments, bankruptcy, various new lines of credit, or maxing out your cards. Any of these can significantly hurt your chances of getting approved for a $2,000 personal loan.
Income verification
In order to prove that you have the means to repay your loan, lenders will want proof of employment and monthly income. You can provide this with documents including pay stubs, W-2 forms, tax returns, or a letter from your employer. A job verification letter should include crucial information like when you were hired, salary, and job title.
Debt-to-income (DTI) ratio
A DTI ratio measures how much of your monthly income goes toward paying debts. You can calculate your DTI ratio by dividing your gross monthly income by your monthly debt payments (such as credit cards, car payments, student loans, and other loan payments). Try to keep your debt-to-income ratio at 36% or lower. A 43% DTI ratio is considered OK.
Types of $2,000 loans
Unsecured personal loans
Unsecured loans are the more common choice for those pursuing $2,000 loans. An unsecured loan requires no collateral, such as your home, car, cash, or other assets. Without needing any collateral, unsecured loans have stricter requirements. The best personal loan rates you can access depends on your credit score, and you typically need good or excellent credit to qualify for unsecured loans. You must also demonstrate your ability to repay your loan, and prove you have a reasonable amount of liabilities compared to your income.
Payday or cash advance loans
A payday loan is a high-cost, short-term unsecured loan, whose principal is part of your next paycheck. They provide funds almost immediately and have high interest rates, which are based on your income. Payday loans are for smaller amounts of money, commonly $500 or less.
Cash advance loans are short-term loans that are often available through credit card issuers or cash advance apps. If you apply a credit card cash advance, your issuer predetermines how much you can borrow, and interest will begin to accrue immediately. Cash advance apps provide access to cash that you will replenish with your next paycheck, and those apps collect payments automatically. The cost of going through an app depends on the platform, where certain apps charge fees, and others allow you to leave a tip instead.
Applying for a $2,000 loan
Application process
Before submitting a formal application, you can prequalify for a $2,000 loan and compare estimated rates, fees, and loan terms from multiple lenders. Plus prequalifying doesn't affect your credit score.
Lenders review your basic financial and personal information, such as income, employment status, monthly debt payments, and the purpose of your loan. They will also perform a soft inquiry on your credit, which has no impact your score.
However, prequalifying for a personal loan doesn't guarantee you'll be approved. The formal approval process for taking out a personal loan is more in-depth, and lenders may catch something they didn't during the prequalifying process. You'll also have to agree to a hard credit inquiry, which will probably reduce your credit score slightly for a short time.
Next step:See if you're prequalified for a loan without impacting your credit score.
Selecting a lender
The best way to review loan offers is by prequalifying. From there, you can compare the different offers available to you. Many credit unions, banks, and online lenders will offer prequalification to potential borrowers.
Prequalification can give borrowers a better sense of whether or not they would get approved. Keep in mind that getting approved through prequalification does not mean you've been approved for a loan. It just indicates that you're likely to be approved, unless issues that didn't arise in the prequalification process present themselves in the formal, more thorough approval process.
Loan approval and disbursem*nt
Approval timeline
How fast or slow it takes to get a $2,000 loan depends on the lender. Some lenders can get you your money the same day you are approved, while others may take a few days. In general, there's no guarantee on how fast or slow you'll get your loan.
Managing the loan funds
The monthly cost of a $2,000 loan can differ based on the regular annual percentage rate (APR) and the terms of your loan. For example, a $2,000 loan with a 10% interest rate over two years would cost you $92.29 per month. But the same amount with the same rate over five years would cost you $42.49 per month.
Applying with bad credit
You need a certain credit score to get approved for a personal loan. The better your score, the better chance you have of getting approved for a loan with a low-interest rate. Most lenders require borrowers to have a minimum score of around 670, which is considered a "fair" score. Nowadays, it's easier than ever to check your credit score for free.
Borrowers with bad credit scores, such as those with scores of 580 or under, will have the most trouble getting approved for a $2,000 loan. There are some lenders that specialize in approving loans for bad credit, but they often charge high-interest rates.
If you have a bad credit score, credit union personal loans may be the best option as they tend to be more flexible. The National Credit Union Administration caps the APRs they can charge on loans at 18%.
Repayment Strategies for a $2,000 Loan
Repayment plan development
You may benefit from a $2,000 loan if you have a high credit score, a low DTI ratio, and a reliable source of income. But keep in mind that just because your loan is small, that doesn't mean there are no consequences. Paying your monthly loan payments, getting a good rate, and spending your money wisely is key.You have to pay your loan back in full, so don't exceed your spending limits or spend too quickly. Borrow only what is necessary and don't commit to unreasonable monthly payments.
Best $2,000 loan offers
If you're looking to take out a $2,000 loan, here are some lenders worth considering:
Upgrade Personal Loan
Upgrade has some of the lowest APRs options available, with rates ranging from 8.49% to 35.99%. However, only borrowers with the best credit score can qualify for Upgrade's lowest rates. Still, the minimum score to qualify for an Upgrade Personal Loan is 580.
It offers loans as small as $1,000 and as large as $50,000. Loan terms range from two to seven years, and you'll pay a $10 origination fee.
PenFed Credit Union Personal Loan
PenFed Credit Union Personal Loan offers loans from as little as $600 with rates ranging from 7.99% to 17.99%. You need a credit score of at least 580 to qualify.
PenFed does require borrowers to be a PenFed member either through previous or active military service or a PenFed savings account, which requires a $5 minimum deposit.
Avant Personal Loan
Avant is best for borrowers with credits as low as 600 looking to take out a loan as little as $2,000 Avant rates range from 9.95% to 35.99%. Borrowers with lower scores are more likely to get charged a higher APR. Avant also charges multiple fees, such as an administration fee of up to 4.75%.
Best Egg Personal Loan
Borrowers with very good to excellent credit scores are best for a Best Egg Personal Loan as it offers one of the lowest APRs with rates between 8.99% to 35.99%, and quick access to loan funds.
However, it does charge an origination fee between 0.99% and 5.99% and requires a credit score of 680.
Navy Federal Credit Union Personal Loan
You can get a loan of as little as $250 with Navy Federal with rates ranging from 8.99% to 18.00%. It doesn't require a minimum credit score to be approved. Instead, Navy Federal may weigh other qualifications requirements (such as your DTI ratio) more heavily.
Similar to PenFed, you must be a Navy Federal member to join. Active military or veterans are eligible to join, as well as employees of the Department of Defense.
Alliant Credit Union Personal Loan
Alliant is best for borrowers looking for shorter repayment terms and no origination or late payment fees. It offers rates ranging from starts at 11.79%. It has an unspecified minimum credit score.
Alliant requires a membership to take out a loan. To qualify, you can work with one of the organizations Alliant partners with, be a family member of an Alliant member, or work in a community near the credit union's corporate headquarters in Illinois.
FAQs
What's the typical interest rate on a $2,000 loan?
The typical interest rates for a $2,000 loan varies based on lender, the borrower's credit score, and loan type. Rates range from low single digits to much higher.
Is it possible to get a $2,000 loan with a low credit score?
Yes, it's possible to get a $2,000 loan with a low credit score, but the options may be limited. Lenders with bad credit loans might offer higher interest rates or require a cosigner.
How long does it take to receive a $2,000 loan?
Depending on the lender, it can be as quickly as the same day or a within a few days for funds to be disbursed.
Are there any specific loan requirements?
Specific loan requirements vary by lender but generally include proof of income, credit history, a valid ID, and a bank account.
Is a payday loan wise for a $2,000 loan?
While payday loans provide quick access to cash, they come with very high interest rates and short repayment terms, making them the less wise option for borrowers.
Junior Investing Reporter
Tessa Campbell is a Junior Investing Reporter for Personal Finance Insider. She reports on investing-related topics like cryptocurrency, the stock market, and retirement savings accounts. She originally joined the PFI team as a Personal Finance Reviews Fellow in 2022.Her love of books, research, crochet, and coffee enriches her day-to-day life.
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