How to get a $5,000 personal loan: A complete guide

Sometimes, something happens and you need money urgently. Whether it’s an unexpected car repair or a hospital bill, a personal loan is a common way for people to borrow cash and bridge a financial gap.

Personal loans are widely available and flexible, so they’re suitable for people who need to borrow small to medium amounts relatively quickly. If you need to borrow a small amount, such as $5,000, to pay an unexpected bill, we’ll cover what you need to know.

Where to get a $5,000 loan

One of the benefits of personal loans is that they are widely available. You can get them from a variety of places, including local banks, credit unions, and online lenders.

For example, Rocket Loans℠ offers same-day funding, which can be helpful if you need cash quickly.

Alternatives to $5,000 loans

A personal loan is one option for people who need to borrow $5,000 relatively quickly, but it’s not right for every situation. It’s important to consider other options that may be a better fit for your needs.

• Apply for medical financial assistance. If you need cash to pay for a hospital stay or other medical bills, you may want to check with your medical provider’s billing office to see if there are any assistance programs available. Many providers will work with you to set up low-cost payment plans, can forgive some of your bill, or offer to connect you with other sources of assistance to pay your bill.
• Tap into savings. If you have some cash set aside in a savings account, you may not need a loan at all. Instead, withdraw money from your savings and use it to pay the bill, then create a plan to rebuild your emergency fund.
• Apply for a 0% APR credit card. If you have solid credit, you may consider a no-interest credit card as an alternative to a personal loan. Many credit cards offer an introductory promotion where you pay no interest for the first 12 – 20 months you have the card. Just make sure you have a plan to pay off the full $5,000 balance before that period ends. Otherwise, interest will start to accrue at the credit card’s typical interest rate.
• Getting a secured personal loan. If your credit isn’t great, you may still be able to get a secured personal loan. These work like personal loans but require collateral. However, that makes them easier to qualify for and may help you secure a lower interest rate.
• Consider a cash advance. Many credit cards offer cash advances, so you can take some cash out of your card. This should not be your first option, because credit card rates are high, and many cards charge cash advance fees.
• Borrow from your 401(k). If you have money in a 401(k) retirement account, you can consider taking a loan from the account. This should be a last resort because it means taking money out of your retirement account. If you miss payments or encounter other issues with the loan, it may also result in tax penalties.

How to get a $5,000 loan

If you’ve decided that a $5,000 personal loan is right for you, use these tips to apply for one.

1.   Find out if you meet eligibility requirements

The first thing you need to do when seeking a personal loan is to check multiple lenders and research their eligibility requirements. Different lenders target different types of borrowers, so if one lender has credit score requirements you can’t meet, look for other options.

It’s worth checking your credit report to see what kind of score you have. You can get a free credit report once per year from each of the three major bureaus. You can use that information to get a sense of what type of lender you should work with or if you should consider looking for a cosigner to give yourself better odds of approval.

2. Decide which type of loan to apply for

Next, think about the type of personal loan you should apply for. There are many different types of loans, including unsecured loans, secured loans, debt consolidation loans, and home improvement loans.

If your lender offers a personal loan specialized for your situation, you may consider applying for that loan if it has unique features or perks. For example, a lender may offer a slightly lower rate for people who want a home improvement loan or may offer to send funds directly to your lenders if you’re applying for a debt consolidation loan.

3. Get prequalified

Getting prequalified for a personal loan requires providing basic financial information so a lender can determine if you’re likely to be eligible for a loan. The lender also conducts a soft pull on your credit, which has no impact on your score.

This provides the lender with enough information to offer you a quote that shows the amount you can borrow and the interest rate you’ll pay, allowing you to compare multiple loan options.

4. Compare and rank your loan options

You should make sure to get prequalified with a few different lenders. Aim for at least three, but there’s nothing wrong with getting prequalified with more lenders.

Once you have multiple quotes, you can compare them and rank them from best to worst. Consider factors such as the interest rate of each loan, the loan term, and any relevant fees and penalties, including origination fees or prepayment penalties.

5. Apply for a $5,000 personal loan

Once you’ve decided on which loan is the best for your situation, you can submit a complete application. You’ll need to provide the lender with more information about your finances, as well as some documents for a personal loan, including:

• A form of identification
• Bank account information
• Tax forms
• Statements for any other debts you may have
• Proof of income or pay stubs

6. Agree to the terms and receive funds

If the lender decides to approve your loan application, you’ll get a contract to review and sign. Read the document carefully and make sure you understand its key points. If it all looks good, you can sign the paperwork.

Depending on the lender, you may be able to receive the funds the same day or may need to wait a few business days.

Pros and cons of $5,000 loans

A $5,000 personal loan can be a suitable option for handling a financial emergency, but it’s essential to consider its drawbacks as well. Any time you apply for a loan, be sure that you have a plan to pay it back and follow responsible borrowing practices.

Pros

There are many reasons to consider a personal loan if you need to borrow $5,000 on short notice.

• Fast funding. Many lenders specialize in quick underwriting and funding for personal loans. With some lenders, including Rocket Loans, you could even get your loan funded the same day you apply.
• Allows the borrower to build credit. If you handle your loan responsibly and make timely payments, it can help improve your credit score.
• Flexibility. Personal loans are flexible. You can use them for almost any purpose. Regardless of your reason for needing cash, a personal loan is likely a viable option.
• No collateral. Most personal loans are unsecured, so if you don’t have any collateral to provide, you can still qualify for a loan.

Cons

Before applying for a personal loan, consider these drawbacks.

• Origination and other fees. Many personal loans come with fees, such as origination fees. These fees could be added to the loan’s balance, meaning you have to pay off more than you actually borrowed. For example, if you get a $5,000 loan with a 5% origination fee, you’re starting balance will be $5,250.
• Missed payments can damage credit. Just as handling the loan properly and making your payments will boost your credit, handling the loan poorly could damage your credit. One missed payment could drop your score significantly, making it harder to get other loans in the future.
• Be cautious of scams and predatory loans, such as payday loans. The lending industry, particularly those focusing on relatively small amounts, such as $5,000, sees its fair share of scammers. You need to be vigilant and make sure you’re working with a reputable lender that charges reasonable rates and fees.

FAQ

Personal loans are a good option for individuals who need to borrow money quickly, but they can be somewhat complicated. It’s important to make sure you understand how they work before applying.

What kind of credit do I need for a $5,000 loan?

The credit score you need to take out a $5,000 personal loan, or a loan of a different amount, ultimately depends on the lender. On average, you’ll need a credit score of around 650 or higher to be approved for a favorable interest rate on a personal loan. Rocket Loans has a minimum credit score requirement of 640. Your creditworthiness impacts the loan options available to you. Borrowers with excellent credit tend to qualify for loans with the lowest rates and ideal terms.

What is the monthly payment on a $5,000 personal loan?

The monthly payment on a $5,000 loan depends on factors such as the interest rate and repayment term. Current interest rates for personal loans are in the 6% – 36% range, generally speaking.

Let’s say you have excellent credit and can repay your loan in 36 months. You might be able to secure a $5,000 loan with a 6% interest rate. That would result in a monthly payment of $152.11. You’d pay a total of $5,475.95 over the life of the loan, of which $475.95 would be interest.

How can I get $5,000 now?

If you need $5,000 ASAP, an online lender is likely your best option. Many online lenders can add funds to your bank account as soon as the next business day. Depending on your bank and our ability to validate your information electronically, Rocket Loans may be able to give you same-day funding.

Is it hard to get a $5,000 personal loan?

Getting a $5,000 personal loan typically isn’t difficult unless you have poor or damaged credit. Most people with reasonable income and fair credit should be able to find a willing lender.

The bottom line: A $5,000 personal loan helps you get the cash you need

If you’re facing a financial emergency, a personal loan can be a good source of funds. However, before applying for any loan, it’s important to make sure that you understand the terms and conditions of the loan and how you’ll be expected to repay that debt. Make a plan for how you’ll handle the payments to help prevent yourself from falling deeper into debt.

If you’re worried about your credit preventing you from qualifying for a personal loan, there are still other options. Consider one of the alternatives recommended above or try to find a cosigner who is willing to help you get a loan.

If you’re ready to start comparing loan offers, Rocket^® is a great place to start. Get prequalified for a personal loan with Rocket Loans today.