Dealing with money matters can often be challenging and tricky, especially when unexpected expenses arise. People have long turned to loans to help them pay debts, make home improvements, or shoulder other costs. Personal loans are merely one type of credit that you can use to borrow a certain amount of money, but getting one will come with a huge responsibility. No matter how much your loan, you must stay on top of your repayments to ensure your credit score remains high.
While personal loans are often assumed to be high-value loans for bigger expenses like medical bills or tuition, they can also be used to cover smaller expenditures. Small Loans, which are often defined to be $3,000 or less, are applicable for instances when you run into unforeseen expenses but do not have enough cash on hand. When this happens, getting a small loan can help you solve your cash problem, but just like any other loan, it is essential to understand how the process works before getting one.
Lenders’ Terms and Requirements
Small Loans work similarly to any other personal loan. So, it is vital to look through different lenders’ terms before applying for one. To help with your decision, you can consider these factors:
- Origination Fee
Some lenders may charge a one-time origination fee, which can be a fixed amount or a percentage of your loan amount. You can think of it as an administrative expense incurred to process your loan. Factors like your credit history and the loan amount may affect the origination fee, but this may not be as common for smaller loans. Thus, you can try looking for different lenders to compare your options first.
- Secured or Unsecured
Small loans, like business loans, can be secured or unsecured. As the name suggests, secured loans require collateral to provide the lender with more security. The advantage is that they are easier to get, and you may be able to find more favourable terms, but you risk losing your asset if you fail to repay. On the other hand, unsecured loans are far less risky but tend to have higher interest rates.
- Repayment Terms
Small loan lenders will typically give you up to three months, more or less, to repay the loan. Each can have different repayment terms. So, if you like having the liberty to choose this, you can find a lender that offers many payment structures.
Applying for a Small Loan
Various lenders can offer loans in different amounts. You may find that some have a minimum set higher than $3,000. Fortunately, some lenders allow a lower minimum limit, so check all your options before choosing one. Similarly, each lender will offer different interest rates, repayment terms, and loan policies. So, take your time looking for the right lender.
Nowadays, the application process is much easier as you can do it online. With a few clicks, you can get the loan amount transferred to your account. The application can take as little as five minutes. While each lender’s process may vary, the first step will often involve getting personal information like your credit history, proof of income, and the loan details. Within a few minutes, you will be notified if your application is approved. If it is, you can expect the funds to be transferred to your account right after.