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Need a $1,000 Loan? Know Your Options

by Ana-Maria Sanders   August 21, 2019

Learn more about taking out a smaller loan by reviewing the advantages and disadvantages of several popular lending options.

If it was easy to maintain an emergency fund, everyone would do it. Unfortunately, accidents and unforeseen expenses crop up, and the average American consumer may not have enough to cover a major expense of over $400. What happens you find yourself needing a $1,000 loan in a hurry? Here are some ways people can get a $1,000 loan without going through a bank:

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Secure a Loan from Family or Friends

Text your family or friends and ask for a $1,000 loan.

This remains on top of the list because, in general, people rely on their closest support system when they are in a bind. Family is flesh and blood, and they are often willing to help their loved ones. The same holds true for friends. Friends are, after all, the family people get to choose, so relying on them during a financial crunch is not unusual.

The primary consideration here is to have a good, honest talk with them about the loan terms. This includes discussing if there will be interest or how much time they are willing to give for repayment. If possible, have a written loan agreement to keep things clear. Another important thing: the borrower must never default on the payment because it can adversely affect relationships.

What are the advantages?

Family-originated funding is quick to obtain and doesn’t require a credit check because it is based on trust and a good relationship. In case borrowers make late payments, it doesn’t affect their credit score. There are no unnecessary processing fees. Sometimes, if the family member or the friend thinks it is okay, they don’t even collect interest.

What are the disadvantages?

The last thing that people want is to have relationships turn sour because of monetary issues. There’s a wise adage that says: “Never lend money to a friend because you might lose both!” This remains the biggest caveat of this type of loan. The person who made the loan must do good on the promise to pay it back on time indicated, along with the interest payment. Trust will be compromised if a borrower reneges on his word; and trust, once broken may never be mended.

Get a Pawn Loan

Borrow money with a small pawnshop loan.

Getting a loan from a pawnshop is another quick way to get $1,000. Pawn loans require borrowers to put something of value as their collateral, so they can borrow money. It comes with high interest, which varies from as low as ten percent to astronomical numbers depending on the area. The interest that people pay on their loans could also depend on the state laws and the personal history of the borrower with the pawnshop.

Pawnshops offer around a quarter to half of the collateral’s resale value as the loan amount. This depends on the pawnshop, so people may have to shop for the best deal in the area. Pawnshops don’t follow the same standards when it comes to appraising the items. Loan terms also vary from a minimum of 30 days to a few months.

The pawn shop will issue the borrower a ticket when the shop hands over the money and the borrower leaves the item. This pawn ticket will include all the necessary fees, the loan terms, the interest rate, the grace period allowed, and the final date for which the money must be repaid before item forfeiture. If the money is paid on time, the borrower gets it back. If payment is late but falls within the grace period, late payments may be collected. If unpaid, the pawnshop will sell the item to recoup their money.

What can be pawned?

  • Jewelry
  • Latest electronic devices
  • Expensive power tools
  • Musical instruments
  • Firearms
  • Cameras and other expensive photography equipment

What are the advantages?

This financial product is easy to obtain. Just present an ID, show the item, get the appraisal, and get the money. There is no lengthy process involved, and the money can be obtained instantly. There is no credit check involved because the loan is backed by the valuable item the borrower is leaving behind. If the loan cannot be repaid, this will not impact the credit history because the pawnshop will simply keep and sell the item.

What are the disadvantages?

A pawn shop loan is expensive with hefty processing charges and the large interest rates. The appraisal of an item is also very low because the pawnshops tend to low ball and take advantage of the situation of the borrower. The sad part here is if the borrow defaults on the loan, the item they used as collateral may be worth more than the loan amount itself. For instance, a borrow leaves jewelry, and he is unable to claim it, he suffers an immense loss, especially if the jewelry could have been sold for a higher price. Often, people get into this kind of loan thinking they can pay it to get their items back; but unfortunately, things don't always go as planned. Moreover, there are other additional feels like insurance, storage, and more, so it is vital to read the fine print. The amount given per pawned item is small, so if people need a thousand dollars, they may need to pawn several items to get it.

Request a Car Title Loan

As the name implies, this means the borrower will get the $1,000 he needs by using his vehicle as the collateral. Another term for this is a pink slip loan. Typically, the amount that can be given will depend on the vehicle’s current market price value, and the lender may cap the loan amount to half of this price. For a car title loan to be considered, the borrower must own the vehicle, or have enough equity in their automobile that the loan makes sense. The title must be free and clear, without any liens.

What are the advantages?

While there may be a credit check involved in this kind of transaction, it may not have a large bearing on the loan decision. This is a good option when someone possesses an urgent need for money because the process is fairly swift, and the money can be given as soon as the next business day after the car is assessed. These are some of the requirements for car valuation:

  • The borrower’s identification with the residence attached on it
  • Contact numbers
  • The car registration
  • The proof of car insurance
  • Income statements
  • Some lenders require a copy of the keys of the vehicle to be left at their possession, or they have some sort of GPS tracking system installed in the vehicle

What are the disadvantages?

Car title loans are very expensive. They come with processing fees and hefty interest amounting to 25 percent and even more. For instance, a $1,000 pink slip loan at that interest rate will result in the borrower paying $1,250 in 30 days. The APR rates can be very high on car title loans. If the buyer is unable to pay, the interest just keeps on piling up. Those who are unable to pay their pink slip loans can lose their vehicle. To make things even worse: the amount of the loan is less than the value of the car, so the borrowers end up losing much more than their principal. Some people avoid this type of lending because of these risks.

Check if You Qualify for a Loan with Your Employer

Some big companies allow their most loyal and trusted employees to get what is known as a Loan Against Salary. This is usually extended only to top-performing employees as a form of retention tool. Employers give a limited line of credit or a loan option to key employees. The amount depends on the number of years of service and the salary of the person. Employees can repay the loan with a check or cash, but more often, employers deduct payments from the salary either in whole or in small increments. The terms of this loan will be discussed with the one handling the payroll, and the terms depend on a case-to-case basis depending on who is borrowing.

What are the advantages?

Borrowing a small amount against future wages from an employer doesn’t require any stringent background checks because the human resources department already has an existing file on the borrower. The borrower’s credit history is often not affected by this loan (though it might be). Depending on the employee’s tenure, this loan can even be borrowed at zero or low-interest rates, making it more affordable than other loan options. On top of that, it can be slowly deducted from the salary, so coming up with the money to pay for it should not cause much stress.

What are the disadvantages?

This option is not available for all employees. If available, a potential borrower should consider the negative consequences that may result if they have difficulty repaying the loan. It is important to maintain a good reputation in the workplace. Bringing financial problems into the workplace can jeopardize an otherwise good reputation. Although, if the loan is paid back on time and without issue, it should not negatively affect one’s standing at their company.

Take Out an Unsecured Shorter-Duration Loan

Use a shorter-duration thousand dollar loan to meet your expenses.

This kind of loan means that the borrower does not provide any collateral for the lender, and they must pay back the money in a lump sum after a short amount of time. As such, only a small amount can usually be loaned. Do not confuse this with a loan against an employer because they are two entirely different options. A lender in this picture is not an employer but a financial company that specializes in giving personal loans, with requirements differing from a traditional banking model.

Usually, getting this loan requires some documentation. However, this process is not as stringent as the bank’s requirements. Find a local lender or an online lending company to make an inquiry about the potential interest rates and processing fees associated with taking out a one-thousand-dollar loan.

Most lending companies require at least the following details:

  • Proof of employment for the last three months that shows the name of the current employer
  • Possess a net income of more than a thousand dollars every month post-deductions
  • Proof of citizenship and permanent residency documents
  • Must be 18 years old and above
  • Contact numbers
  • Address
  • Valid email address
  • Valid checking account details

Depending on their company policies, some lenders may require additional paperwork, but the above-mentioned details are the standards ones.

What are the advantages?

Once the necessary requirements have been submitted, it may take as little as minutes to one day to process the inquiry. Once there is an approval, the lending company will deposit the one thousand dollars into the borrower’s bank account as soon as the next business day. The request process is done online, so borrowers can save their time and effort from going to the lending firm. Applying for this kind of loan saves many people in times of distress because of the fast turnaround rate. Getting this type of loan also has a possibility of increasing borrowers’ credit ratings if they pay it on time.

What are the disadvantages?

Every application usually includes a credit check. This can easily go on a borrower’s credit history, and as stated above, it can influence credit ratings. Failure to pay this loan on time can result in a lower credit score. Another major disadvantage is this kind of loan comes with processing fees and interest, making the total rate for this amount reach a high APR. This makes it hard for some people to get out of debt. Some lenders are notorious for taking advantage of people who are in dire need, which is why borrowers must be vigilant in protecting their own interests. With this kind of loan, failure to pay on time may result in expensive penalties.

Take a Loan Against an Existing Life Insurance Policy

A life insurance policy offers protection and sometimes a form of investment for the principals and their chosen benefactors. These days, life insurance policies are more versatile compared to the traditional life insurance policies of the past. Certain policies don’t just provide security and protection, but they can now be used when there is a financial crisis. But first, borrowers must make sure that they qualify for this kind of loan. This plan is not applicable for term life insurance because these plans do not possess any kind of cash value. As for non-term plans like VUL or whole life insurance, borrowers can take a loan against a portion of the value or the whole of the value of the insurance.

What are the advantages?

When a person borrows against his or her own insurance policy, it is like borrowing from his or her own self. Thus, the money can be accessed for any reason without having to provide a detailed explanation. There is no strict approval process for this kind of loan. The income of the borrower is not a factor for approval. A lower rate of interest is given compared to a personal loan. The interest rate charged is usually paid based on the premiums that have been made. As the borrower pays their premiums, the amount of interest required will be less. Another advantage of loans against a life insurance plan is that the policy value may not change with the market.   

What are the disadvantages?

The insurers may terminate the policy if the borrower ceases to pay the premiums. The loan must be repaid within the term of the insurance policy. There is an option to pay both the interest and the principal. There is also another option to pay the interest only, but the principal will be deducted from any future claims made. The loan must be paid back on time, or interest will compound and be added to the balance, which increases the risk of the loan amount exceeding the cash value of the policy, which then negates its purpose.  

Bottom Line

There are many ways to get a loan for $1,000, and borrowers benefit by researching each lending option. They should start by checking to see if they are eligible so as not to waste time applying for a loan they cannot receive. Borrowers should read all the terms and conditions of the loan. People in a bind must not make hasty decisions because their $1,000 loan may end up costing double or even more.

Ana-Maria Sanders   LoanStart Marketing Manager
Personal Finance