Why Choose a Small Dollar Personal Loan for Financial Emergencies

We all know that financial emergencies and unexpected expenses can arise at any moment. Many people may not realize how we handle them can impact our lives long after the emergency, and a small personal loan may be their best solution. 

About half of all Americans would be unable to cover an emergency expense of $400 or more without borrowing money or selling possessions, which drives many people to take out predatory payday loans. This can drive hard-working Americans who are already socioeconomically vulnerable into greater financial hardship that can be difficult to escape. 

Fortunately, there’s an alternative to payday loan risks: the small dollar loan (also called a small personal loan). These are fair, affordable loans that can not only cover emergencies in the present but offer a fair and equitable pathway toward financial stability and economic empowerment in the future. Here are some of the little-known benefits.

Understanding Small Dollar Loans

Small dollar loans typically refer to loans with relatively low principal amounts, often ranging from a few hundred to a few thousand dollars. These loans are designed to address short-term financial needs between paychecks, such as car repairs, medical bills, and basic living expenses.

The Advantages of Small Dollar Loans

Small personal loans from any reputable lender can offer the following benefits:

• Low, fixed interest rates. Compared with other forms of credit like payday loans, small dollar loans often come with lower interest rates, making them more affordable in the long run.
• Fast access to funds. Small dollar loans provide quick access to cash, helping consumers address pressing financial needs without delay.
• Repayment flexibility. Borrowers can choose repayment terms that fit their budget, with flexible terms ranging from 12 to 36 months.
• Transparent fees. Reputable lenders disclose all fees upfront, helping to ensure that borrowers understand the total cost of borrowing without falling prey to hidden charges.
• Building or improving credit. Consumers with limited credit can use small dollar loans to create and improve their financial track record and credit scores. To do this, borrowers should choose realistic loan terms that work for them and make all payments on time.
• A pathway to building generational wealth. Particularly for consumers experiencing poverty and barriers to financial wellness caused at least in part by institutional forms of discrimination, building generational wealth is essential for providing current and future family members with greater economic opportunities. Building credit with small dollar loans and paying off debt under favorable terms are excellent strategies for doing this.

The Benefits of Small Dollar Loans From Nonprofit Lenders

Small personal loans from nonprofit lenders, especially from Community Development Financial Institutions (CDFIs) can come with:

• Free credit reporting. Nonprofit CDFIs offer free credit reporting to major consumer reporting agencies, helping borrowers build or improve their credit history.
• Fee-free financing. Unlike some traditional lenders, nonprofit CDFIs typically waive application, origination, servicing, and prepayment fees, reducing the overall cost of borrowing.
• Flexible underwriting standards. Nonprofit CDFIs often have more flexible underwriting standards, allowing them to approve borrowers whom traditional lenders might turn down.
• Next-day availability of funds. Many nonprofit lenders offer complimentary Automated Clearing House (ACH) disbursements, ensuring that funds are available to borrowers as soon as the next business day.
• Automatic recurring payments. Nonprofit CDFIs may offer automatic recurring monthly loan payments, simplifying the repayment process and reducing the risk of missed payments and late fees.
• Financial education. Many nonprofit lenders offer various forms of financial literacy training and resources. This is a win for all involved: it ensures that borrowers can make sound decisions and helps nonprofits achieve their mission of offering greater financial and economic justice for historically underserved communities.

Small dollar loans are crucial in promoting financial wellness and empowering consumers to overcome financial obstacles. Particularly when borrowers choose nonprofit lenders, these loans offer not just a lifeline in an emergency but a path to building overall financial wellness and wealth. By providing access to affordable credit with transparent terms and supportive features, ethical small dollar loans contribute to a more inclusive and resilient financial ecosystem for all.

Get a Small Dollar Loan Today With the Economic Justice Fund

The Economic Justice Fund is a mission-driven, nonprofit lender dedicated to helping Americans pursue the American Dream. We believe that all Americans, regardless of income, race, gender, or zip code, should have access to fair, affordable financing. 

At EJF, we offer low-cost loans that help you reach your goals safely and responsibly. You can complete our application in less than five minutes, and one of our Loan Specialists will quickly review your application. Loans are funded as fast as one business day. Apply today!

EJF is certified as a Community Development Financial Institution by the U.S. Department of the Treasury. In addition to ethical, equitable loans, we provide financial training and credit building services to empower individuals in underserved communities. Read our success stories and choose the financing plan that fits your needs!