How to get a $5,000 personal loan

Sure, it’s common to borrow five figures for a car or six figures for a home. But even smaller loans can have a big impact on your ability to reach financial goals or improve your quality of life. A few thousand dollars is a practical amount of money that could help you cover an expense that’s a little too big for your everyday budget. A $5,000 personal loan could give you just the financial boost you’re looking for.

The basics: What you need to know about a $5,000 personal loan

Personal loans are installment loans, where the lender gives you a lump sum of money, and you pay it back in equal payments each month. 

Most personal loans are unsecured. That means the lender will review your financial situation and credit profile to decide whether to approve your application. When a loan is unsecured, that means you don’t need to offer collateral to the lender. Collateral is something valuable that guarantees the loan (for example, when you get a car loan, the car is the collateral).

For many personal loans, you’ll pay an origination fee, sometimes called a lender fee. That’s a one-time expense for administration and processing costs, and it’s usually deducted from the loan. Not all lenders have origination fees, but fee-free loans may have higher interest rates instead. 

Personal loan costs

It’s smart shopping to consider how much a loan will cost you, especially if you’re comparing it to alternatives like credit cards. Besides the origination fee mentioned above, you’ll also pay interest. Your rate will depend on your creditworthiness, how much you borrow, and the loan term you choose (the number of years you take to pay the loan back). Those factors also influence how much total interest you’ll pay over time. 

Let’s compare three possible scenarios for a $5,000 loan.

As you can see, one of the most effective ways to reduce your total loan costs is to pay it off faster.

How to qualify for a $5,000 personal loan

Lenders will check your credit profile, including your credit score. If you’re nervous about yours, don’t worry—many lenders are willing to work with borrowers who have less-than-perfect scores. Lenders also consider your debt-to-income ratio (DTI)—which is the proportion of your income that you spend on required debt payments each month. 

You’ll need to be planning to use the personal loan for a permitted purpose. The allowable uses are nearly unlimited, but your lender may have a few restrictions in place. For instance, many lenders won’t issue a personal loan to pay for college tuition. That’s because there are special rules and regulations that apply to student loans.

Steps to apply for a $5,000 personal loan

You can apply for a personal loan online, and the process is fairly simple. The sooner you start, the sooner those funds could hit your account. 

Here's what the personal loan application process typically looks like.

• Check your credit. It's helpful to check your own credit before applying for a personal loan so you could get an idea of what lenders will see. 

• Get a rate quote. Rate quotes tell you what you might pay for a personal loan, based on your credit score. Consider getting prequalified with one or more lenders that offer a soft credit check (one that doesn’t hurt your credit score).  

• Gather your documents: Once you choose a lender to move forward with, get all the necessary information together. The lender may ask for recent pay stubs, your I.D., proof of address, and information about where you work.

• Apply. Now you’re ready to submit a formal application. This will typically result in a hard credit check, which could cause your credit score to dip temporarily. 

It shouldn't take more than a few minutes to apply for a personal loan online. From that point, many applicants get a same-day decision. If the lender has questions about your application, it could take longer.

What to expect after a $5,000 personal loan is approved

If your loan application is approved, congratulations! It’s time to make your final decision about accepting it. Nothing’s written in stone until you’ve signed the loan documents agreeing to the terms. 

Once you decide to sign, it’s time to: 

• Receive the money. Every lender has its own time frame for delivering funds for a personal loan. You could see the money the next business day, or it could take longer. If you asked the lender to pay off other creditors directly, they’ll do that instead of sending the money to you. Keep making payments on those debts until you confirm that your creditors have been paid with the money from your new loan.

• Plan for the monthly payment. The first monthly payment is typically due the month after you receive funding. 

• Think about early payoff. Some lenders charge an early payment or prepayment penalty, but Achieve does not. If your situation allows, paying the loan off early could help you save on total interest charges.

Paying back a personal loan

As far as repayment goes, your loan agreement should include:

• Due dates for monthly payments 

• The total amount you'll pay

• When your loan is scheduled to be fully paid off

• What happens if you pay late 

The most important thing is to pay on time each month, since paying late could trigger a fee or impact your credit standing. Consistently making your loan payments on time could help you build your credit score. That, in turn, could open the doors to affordable financial products when you need them in the future (like car loans and mortgages). 

Some lenders offer an interest rate discount for automatic payments. This is definitely worth considering because it’s an extra layer of protection against missing a payment. Also, rate discounts reduce your total loan costs.

Best uses for a $5,000 personal loan

Now that you know how it works, how about some inspo? Here are some ways a $5,000 personal loan could help you:

• Replace old appliances

• Buy new furniture

• Cover an emergency home repair, like a water heater

• Do some minor home maintenance or redecorating

• Pay for car repairs

• Pay for your pet to have necessary veterinary care

• Cover medical bills

• Pay for a funeral and other end-of-life expenses

• Consolidate higher-interest debt

• Buy new electronics or a gaming system

• Cover moving expenses

• Pay for dental work or cosmetic procedures

• Buy 3,000 boxes of macaroni and cheese

Ok, we weren’t serious about that last one, but the truth is, with a personal loan you would have that option. 

The best way to use a personal loan is on the thing that’s most important to you.

What's next

• Check your credit score to get a sense of what lenders will see if you apply for a loan. 

• Sit down with your budget to make sure the monthly payment for a $5,000 personal loan will fit. 

• Find out if you qualify for a personal loan. It only takes a few minutes!