A small dollar loan is a type of short-term loan typically ranging from $100 to $5,000, designed to cover immediate financial needs. It works by allowing borrowers to access quick cash for emergencies or unexpected expenses, with repayment usually due within a few weeks or on the borrower’s next payday. These loans are often used for urgent expenses like medical bills, car repairs, or utility payments. However, they typically come with higher interest rates and fees compared to traditional loans, making it essential for borrowers to understand the terms and repayment obligations before taking out a small dollar loan.