A small loan is a type of unsecured loan. This means you don’t have to post collateral in case you don’t repay your existing loan. The lender does not have the right to confiscate your property if you take out a small loan and do not repay it on time. Nevertheless, there are negative consequences: your credit rating will drop and your small loan could be declared in default.
Small loans require collateral such as your home in the case of a mortgage or your car in the case of a car loan. Small loans use your credit score and credit history to determine if you qualify.
Small loans generally do not have strict requirements. Instead, you can use a small loan for almost anything as long as it initially meets the conditions set out in your loan agreement, you can also learn more about MoneyZap, one of the organizations that offer small loans. Small loans are given as a lump sum and you make monthly payments until your loan is paid off in full. As long as you make your monthly payments, you continue to spend what you want within your limit.
Reasons for taking out a small loan
Small loans or personal loans can be used for almost all your needs within reason and in accordance with the terms of your loan. You cannot use the money for anything illegal. In most cases, for the cost of post-secondary education. Here are some good reasons to get a small loan:
Emergency cash assistance
If you need money right now to cover bills, urgent expenses, or anything else that needs immediate attention, you can take out a small loan. Most lenders provide online applications that let you know if you’ve been approved within minutes. You can get financing the same day or within a few business days, depending on your lender.
You can use the loan to cover emergencies such as:
- Payment of late payments for housing and utilities;
- Medical bills;
- Unscheduled car repairs;
- Funeral expenses.
A small unsecured loan is a good alternative to a payday loan. Payday loans are short-term, high-interest loans that usually have to be repaid when you get your next paycheque. Typically, you won’t need to go through a credit check and you can get financing right away. But payday loans can do more harm than good. Interest rates can reach 400%, and many borrowers do not have the funds to pay off the loan in full as quickly as payday loans require.
Home improvement and renovation
If you own a private home, you can take out a small loan to renovate or modernize it. You can also take out a consumer loan. Home loans and lines of credit are perfect for tackling real estate projects. They are secure and use your home as collateral. If you don’t want to risk losing your home if payments are delayed, a small loan is a reliable substitute in this case. Along with that, getting a small loan can be faster compared to a home equity loan.
If you move near your current place of residence, you may not have to cover major expenses. If you’re moving out of state, you may need extra money to pay for travel expenses with a personal or home loan. Moving means covering the cost of packing your belongings, possibly hiring movers, and transporting your belongings to a new location. A personal loan will also help fund the process of finding a new home. For example, if you find an apartment, you may have to pay the first month, the last month and a deposit. You may also need money to furnish your new home.
Americans owe $1 trillion on their credit cards. Although some of them include purchases made by people, they include interest and fees. It all adds up and can deter many consumers from paying off their credit card debt. A personal loan can be used as debt consolidation, especially when it comes to credit card debt. It is also a popular reason why people take out a personal loan.
Small loans charge low interest rates compared to credit cards, especially if you have a good credit rating. The best loans charge an interest rate of only 4% lower than the double digit interest rates charged by most credit cards. You can take out a loan, pay off your credit card balance, and then make a one-time payment to your new loan department staff.
Financial experts do not recommend borrowing money to pay for a wedding. Instead, consider reducing your wants to stay within your acceptable budget. If you need to borrow money, you have several options such as credit cards and personal loans. Credit cards have higher interest rates than personal loans. There may be even higher interest rates and fees when dispensing cash by credit card. A small consumer loan is a less expensive borrowing option if you need money to cover major expenses.
Total amount of loan overpayment
Do not complicate your life with independent calculations, multiplying interest by the amount of the loan, adding up commissions, etc. Ask the bank or MFO for an approximate payment schedule from which it is easy to calculate the amount of the overpayment. Banks do not always have their own operational offices in your city to receive loan repayments. Thus, be sure to specify the method of payment through terminals. Add the commission to the overpayment amount on the schedule. You will receive the absolute amount of the overpayment in dollars for your convenience. You can divide it by the loan amount and get the overpayment in %.
Keep in mind that the actual payment schedule when obtaining a small loan may differ from that provided to you at the pre-consultation stage. Therefore, before signing the loan agreement, check the final payment schedule with the original and the offer competitors. Feel free to get up and go if the loan terms and payment schedule differ from the original ones that suit you.