When you need to get some cash quickly, a small-loans is a perfect solution. These loans are perfect for emergency money, a new car, home improvement, or other expenses that can’t wait until your next paycheck.
With these loans, you usually won’t need to provide much documentation or meet stringent credit standards like with other types of loans. You simply fill out an application, and in most cases, you will have your money within 24 hours. Best of all, small-loans generally have lower interest rates than unsecured credit cards or unsecured personal loans from a bank.
This article discusses everything you need to know about small-loans, including the different types of small loans and which small loan is right for you. Read on to know about the pros and cons of getting a small loan and where you should look to find them if you think they might be right for you.
What is a small-loan?
A small loan is a type of unsecured loan that has a relatively low amount. Although the amount you can borrow varies from lender to lender, small loans typically range from $500 to $5,000.
While there isn’t an official definition of a small loan, they are typically used to cover short-term expenses such as medical bills, vehicle repairs, home repairs, and other expenses where the funds won’t be needed for long.
A small loan can be issued as a single payment, in which you’ll pay the same amount each month until the loan is paid in full. Alternatively, you can also get a small loan where you make a payment each time you receive the money. This type of small loan is often referred to as an installment loan.
- Small loans are easy to get. You simply fill out an online application and wait for a lender to approve your application and send you the loan proceeds. You often only need to provide basic information such as your name, contact info, and employment information. You may also be asked for a few documents like your most recent pay stub or a W-2 form to verify your income.
- Small loans have lower interest rates than unsecured loans from banks. If you have bad or no credit, alternative lenders like online installment lenders are often your best option for getting a small loan at a reasonable rate.
- Small loans have short repayment terms. While repayment terms vary by lender, you generally have four weeks to repay small loans. If you can’t repay the loan in that time, the lender may take action to collect the money from you.
Types of small-loans
There are two main types of small loans:
- secured and
The terms “secured” and “unsecured” refer to the way you promise to pay back the money you borrow.
- Secured small loans are backed by collateral. You can secure a small loan with a valuable asset such as a piece of property, stocks, bonds, or even a car or motorcycle. Secured small loans are backed by an asset you own. This means if you don’t repay the loan, the lender can take the asset you used to secure the loan.
- Unsecured small loans are not backed by collateral. They are simply based on your promise to pay back the loan. These loans do not require you to pledge any collateral against the loan. While small unsecured loans are the most common, they also come with higher interest rates than secured small loans.
How to choose the best small-loan for you
Choosing the right small-loan for your needs will depend on your current situation and how quickly you’ll need the money.
- If you have bad or no credit, you may be limited on the types of small loans you can get. Luckily, there are online installment lenders who specialize in offering small loans to people with bad or no credit.
- The given time you have to repay the loan will also affect which small loan you should get. If you need the money quickly, it’s better to get a short-term loan with a higher interest rate.
Advantages Of Small-Loans
There are many reasons why people choose to get a small loan. Some of the more common reasons include:
- Short-term financing: Small loans are perfect for financing a short-term expense like a car repair. They generally have lower interest rates than bigger loans, making them a cost-effective option.
- Flexible repayment terms: Most small loans come with flexible repayment terms, letting you choose how you want to pay off the loan. This may be super helpful if you don’t have a large amount of cash immediately available.
- No co-signer required: While unsecured personal loans usually require a co-signer, small unsecured loans don’t have this requirement. This is particularly helpful if you have bad or no credit.
Disadvantages Of Small-Loans
While small loans have several benefits, they also have several drawbacks. Some of the disadvantages of getting a small loan include:
- High-interest rates: While small loans have lower interest rates than unsecured personal loans, they still have higher interest rates than other types of loans.
- Short repayment terms: Many small loans have short repayment terms of only four weeks. This means if you don’t have the money to repay the loan, there are few options available.
Is Small-Loans For You?
Before getting a small loan, you should weigh the costs and benefits. If you can’t pay the loan back on time, the lender may take legal action against you.
While this can vary from lender to lender, unpaid debt on a small loan can also affect your credit score. Small loans often have higher interest rates than other types of loans, so you should make sure you can repay the money on time without affecting other parts of your budget.
If you think a small loan will help you and you have the means to repay it, a small loan may be the right choice for you.
If you don’t think a small loan is a good choice for you, there are other options available.
- Credit cards: This option is only suitable for short-term expenses like medical bills or vehicle repairs. You should only use credit cards in an emergency because they come with high-interest rates and can damage your credit score.
- Get a loan from a friend or family member: If you have a friend or family member who is willing to lend you money, this is another option. However, you should be sure to agree on terms before you take the money, so there are no misunderstandings later on.
- Get an Unsecured loan: If you have bad or no credit, you may be able to get an unsecured personal loan. You can also get a small business loan if you run your own business.
Small loans are small secured and unsecured loans, typically between $500 and $5,000. They are often used for short-term expenses like car repairs, home repairs, medical bills, or other unexpected expenses. Some small-loans lender are: Microfinance Ireland, and An Post Money
While small loans come with higher interest rates than other types of loans, they usually have lower rates than unsecured personal loans from banks. If you can repay the loan on time, a small loan from an online lender may be the best choice for you.