How To Get a $5,000 Personal Loan

5 min read

Posted on July 12, 2022

young family discussing how to get a small personal loan

A personal loan is money borrowed from an online lender, bank or credit union to fund various needs from debt consolidation to medical bills to home renovations. Money received from personal loans may be as high as $100,000.

But you're only looking for $5,000. Is that too small a financial need to warrant a small personal loan? Not at all.

However, before you apply for a $5,000 loan, let's first make sure you understand:

  • The fundamentals of how small personal loans work.
  • Where to obtain a loan.
  • What a personal loan may cost.

How Do Small Personal Loans Work?

No matter the size of the personal loan, a personal loan works as follows:

  • You submit an application to a lender (bank, credit union, or online lender).
  • The lender reviews your application and decides to either approve or reject your request for funds.
  • If approved, the lender offers you a loan and stipulates the interest rate and repayment term.
  • If you agree to the offer, the lender typically deposits a lump sum of cash into your bank account.
  • You repay the loan in monthly installments, plus interest.

Let’s take a closer look.

Requesting a $5,000 Loan

You must apply at a lending institution, such as a bank, online lender or credit union, to receive a personal loan. The lender will then approve or deny your request based on your eligibility and creditworthiness (i.e., the likelihood that you can and will pay the loan back, in full and on time, including interest). Creditworthiness is based on your credit score, credit history, history of late payments and debt-to-income ratio among other factors.

The lending institution may offer you an unsecured loan if you qualify. However, if the lender views you as potentially uncreditworthy, they may require a co-signer on the loan to compensate for the higher risk. Alternatively, they may offer a secured loan (i.e., a loan for which the lender is guaranteed possession of a borrower's asset in the event of default).

Either way, if your loan application is approved, the lending institution may offer you a $5,000 personal loan with repayment terms and interest rates based on your previously determined creditworthiness.

  • Repayment Term: This is the length of time you have to repay the loan. A repayment term on a $5,000 loan may range from 1 to 7 years. Typically, long-term loans mean lower monthly payments and a higher interest rate, while a shorter term means higher monthly payments and a lower interest rate. It's worth considering your financial goals and what you can afford before agreeing to the terms on any small personal loan.
  • Interest Rate: This is the fee paid to the lender for borrowing funds. The interest rate offered on your $5,000 loan may range from 10% and 28%. Of course, the rate may be higher if your credit score is on the low side, or lower if your credit score is high.
  • Origination Fee: Some lenders may charge an origination fee for expenses related to processing your application. Origination fees are typically 1% - 8% of your loan amount. The lender may also charge a fee for repaying the loan in full before the due date.

Repaying a $5,000 Loan

Upon approval, the $5,000 granted under the personal loan will typically be provided in a single, lump-sum payment, typically as a direct deposit to your checking account. The proceeds can now be used to pay medical bills or credit cards, cover the costs of home improvement projects and so much more.

But now that you have the funds, it is time to repay the bank.

Over the repayment term, you'll make monthly payments, at a fixed amount, to repay the borrowed $5,000 and interest accrued.

Where Can You Get a $5,000 Personal Loan?

As mentioned before, a personal loan may be obtained from a bank, an online lender or a credit union. And every lender will have its own way of evaluating loan applications for eligibility as well as its own terms and conditions to offer.

Because of this, it's important to research all available options before applying for a $5,000 loan, to find the offer that works best for you. One quick way to compare options is via an online marketplace, which shares personal loan offers, including rates and terms, from various online lenders, credit unions and banks. Let's take a look at each type of lender.


If you already have an account in good standing with a particular bank, you may be eligible for a more competitive interest rate. What's more, the bank may offer a discount for automated payments.

However, because banks typically involve a more traditional, in-person process for loan applications, the additional logistics may make borrowing from a bank not worth the hassle if you don't have an existing account with them. Moreover, because the process is more manual with banks, the approval and dispersal of funds may take longer. Plus, although applying with your neighborhood bank offers a familiar environment, it also requires getting to and from the bank and waiting until the banker is available - potentially costing you a precious resource: time.

Finally, some banks have stricter requirements than online lenders for determining an applicant's eligibility for a small personal loan. So if you want to apply for a loan through a bank, be sure to understand where your creditworthiness stands in advance, as they may require a co-signer or collateral for approval if your credit score is low.

Online Lenders

With the entire loan application process online, online lenders help make the process efficient and accessible. At the same time, online lenders typically have available loan terms and interest rates displayed on their websites, making shopping around for the most competitive interest rates a comparative breeze.

Likewise, online lenders may allow you to pre-qualify without a hard credit check, so you can see what your options might be before applying. Plus, because there is little to no in-person contact with the online lender when you submit a loan application, the loan approval process could take as little as one day, with the funds issued as soon as the next business day, in some cases.

The application process for a $5,000 loan may be easier than at a bank or credit union due to its digital nature. However, it's important to remember that the lender will still run a hard credit check.

Credit Unions

Credit unions, because they’re not-for-profit and member-owned, can often offer lower interest rates on loans compared to banks. In addition, before applying for a small personal loan from a credit union, you may need to have an existing account.

As with banks, applying for a $5,000 loan through a credit union may be a manual process for both parties. So if you need a personal loan quickly, check to see if you can apply online. If not, be sure to budget time for traveling, scheduling and waiting for appointments, and for your application to be circulated across multiple desks for review.

Like banks, credit unions may also offer a discount for automated payments.

How Much Will a $5,000 Personal Loan Cost?

For many, extra fees on top of interest and monthly repayments come as a total, costly surprise. Others might not consider that the total amount repaid over time will be more than what was borrowed, thanks to interest. So it's worth taking time to thoroughly understand the total cost you may incur by securing a small personal loan.

The costs of a $5,000 loan may include:

  • Loan term.
  • Interest.
  • Origination fees.

Let's look at an example to illustrate how different terms may impact the total costs incurred on a $5,000 loan.

Loan #1

Loan #2

Loan #3

Amount Borrowed
Interest Rate
Repayment Term
12 months
12 months
18 months
Origination Fee
Monthly Payment
Repayment of Amount Borrowed
Interest Paid
Origination Fee Paid
Total Cost Paid

In the table above, a longer repayment term means lower monthly payments now, but higher total costs over time. In contrast, a shorter repayment term means higher monthly payments now, but lower total payments over time.

Note: Additional fees may be charged on a $5,000 loan in the event of a late payment or early repayment in full. Review the terms of any loan before applying to fully understand the financial implications.

Closing Remarks

Whether you're looking to pay off an unexpected medical bill or replace leaky plumbing, a small personal loan can help you cover these costs. As a bonus, on-time monthly payments on a personal loan may give your credit score a boost, making future loan requests that much easier.


The information provided in this blog post is not intended to provide legal, financial or tax advice. We recommend consulting with a financial adviser before making a major financial decision.

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