Small Personal Loans
At some point in our lives, we’ve all gone through it – needing a fix for an unexpected home repair, running a flat tire and needing to get it taken care of immediately, or having to deal with some other emergency expense that pops up out of nowhere. You’re bound to run into an unexpected expense someday, and while it may not cost more than a few hundred dollars, if you don’t have the money saved up to deal with it, you may end up needing to apply for a small personal loan.
If your savings are running low or you’re living paycheck to paycheck and are having a difficult time saving money in the first place, you may not be sure what the right borrowing option is to get the money you need. Do you put the expense on your credit card, opt for a line of credit, or maybe look at installment loans online? Or maybe you’ve never thought of loans as products you could use for small expenses at all. While it’s true that a personal loan can be used to help you make a big purchase like a home or a car, or can be used for large-scale projects like home renovations, small cash loans can also be a useful option to have at your disposal when you have a small emergency expense to take care of.
Let’s take a look at some of the different types of small personal loans out there, some of their benefits, and how to apply for one.
What are Small Loans?
When we’re talking about small personal loans, we’re simply referring to money that you borrow from – or through – a financial institution for some sort of personal expense. The process of repaying your loan is going to be different depending on what type of small personal loan you’ve been approved for, but you’ll typically pay back the amount you borrowed (the principal balance) in addition to interest and/or certain fees. The interest rates and fees can vary based on a number of factors, like your credit score, the financial institution you’re applying with, and more.
The size of a small cash loan can vary, but it usually ranges anywhere between a few hundred dollars to several thousand.
When Should I Consider Small Personal Loans?
Generally speaking, the quick small loans we’re talking about here should only be used when you run into an emergency situation and you’re short on funds. When we say “quick”, we’re specifically referring to the speed of the application process. But why shouldn’t you apply for one of these personal loans when you see a nice sweater in a store window that’s a little out of your price range, or for that new bike you’ve had your eye on for a while? Well, when it comes to small cash loans, the interest rates and/or fees that accompany them tend to be fairly high. Because of this, applying for one for anything other than an emergency situation would be a risky move, especially if you’re tight on money. You could risk falling into a cycle of debt that will likely be tough to get out of. So, you’ll want to make sure you can recognize a situation that may warrant a small loan online, and one that doesn’t.
One person’s emergency situation may look different than another’s, so you’ll want to follow certain general guidelines when it comes to assessing the severity of your situation. For example, maybe your bike is your only mode of transportation for you to get to work. If you pop a tire and find yourself having to miss shifts at work, this likely constitutes an emergency for you. If, on the other hand, your bike tire pops but you can still comfortably walk to work and generally get around without it, you may want to hold off on the repair until you’ve saved up enough money to pay for it out of pocket. In general, if you’re in a situation where you’re faced with going without something that’s essential to your well-being, you can probably count it as an emergency situation. If you’re wondering what an emergency expense looks like in general, they can include things like:
- Essential car or bike repairs
- A surprise trip to the emergency room
- A burst pipe in your home or broken furnace that needs to be fixed immediately
So, if you’re sure you’re in an emergency situation and you need a little financial boost, does this give you the go-ahead to dive right into the borrowing process? Not exactly. Before you try to get a small loan, you’ll need to make sure that you have a plan in place to pay back what you’ll eventually owe. The financial institution offering or servicing the loan should clearly lay out what it’ll cost you, so put that next to your budget and see if you’ll have room for these extra payments. If not, you may want to look at other funding options.
If at this point you’re wondering when you shouldn’t consider applying for small dollar loans, avoid doing so for any of the following things:
- Shopping outings for non-essential items
- Vacation expenses
- Recurring bills that you should be able to account for ahead of time
Your main guiding principle should be that if you’re not in a financial emergency, you probably don’t need to apply for small personal loans.
Types of Small Personal Loans
It always pays to be prepared, and the borrowing process is no exception. This means that before you submit any loan applications, it’s in your best interest to make sure you learn more about the potential borrowing options that are out there. Your options may seem vast, but if you’re in the market for small personal loans online or in person, there’s a good chance you stumble into one of these products.
1. Small Installment Loans
A small installment loan is a type of loan that spreads out your payments over a particular length of time, which can vary depending on the financial institution you’re working with and the type of installment loan you’re applying for. These payments will generally be of equal value and will fall on the same day(s) each month. Your money will come in a lump sum which you’ll need to pay off with interest and/or fees.
2. Lines of Credit
If you know how a credit card works, the general function of a line of credit won’t sound so foreign to you. Just like a credit card, a line of credit is considered to be revolving credit. If you get approved for one, your account will come with a credit limit which you’ll be able to request funds from, as long you have available credit and your account is in good standing. You can either borrow your entire available credit in one go, or do so in small batches whenever you need funds. As you pay back what you owe, you can continue to draw funds on a revolving basis. The charges you pay will be based on the money you draw, not the total amount of your line of credit limit.
3. Title Loans
If you’re looking for a different small cash loan option, another route you might be able to take is to take out a cash advance from your credit card. This essentially gives you the capacity to withdraw cash from an ATM by using your credit card. Don’t mix this up with your normal credit card transactions though. The money you withdraw through a credit card cash advance will come with steep interest rates and unlike your normal transactions, the interest will start to accrue immediately.
4. Credit Card Cash Advance
Another fast personal loans option that may be available to you is to get a cash advance through your credit card. This will let you draw cash through an ATM using your credit card. Just remember that interest rates on these types of transactions are generally quite high, and the interest you’ll need to pay is going to start building up right away. Reserve this option for emergency situations only.
Potential Benefits of Small Short-Term Loans
Now that you have a better idea of when short-term loans may be a good idea and what types of small personal loans are out there, it’s time to go over some of their potential benefits. Here’s a list of some of the more common ones.
1. Convenient and Fast Online Application Process
One of the biggest benefits of a small cash loan is that you may be able to find what you’re looking for in the form of potentially easy personal loans online. But why is that beneficial? Well, for starters, online loans today generally offer a fast application process that you can breeze through in just a few minutes. The length of an application may vary based on the financial institution you’re applying with or through.
If you compare the process of applying for small loans online vs. in person, you can see how the online application process may be faster. When you apply for a personal line of credit or loan at a storefront lender, you’ll need to consider the travel time, working your trip to the location into your schedule, and the wait time to speak to someone once you get there.
On top of this, small loans online offer a convenient process that you can start from your home, your workplace, or anywhere you have internet access. When you’re dealing with an emergency expense, time is of the essence, so a quick small loan online may be the right choice for your needs.
2. You May Not Need Collateral
When we’re talking about small personal loans, most of the loans we’re discussing (other than title loans) are going to be unsecured. With an unsecured loan, you won’t need to put up collateral in order to qualify. This means you won’t need to worry about losing a valuable asset if something goes wrong and you miss some of your loan payments. That’s not to say that there are no consequences to missing payments. You could still face steep late charges, damage to your credit history, and your account may end up with a collection agency. On top of this, unsecured loans tend to come with higher interest rates than their secured counterparts. But, you won’t need to worry about the possibility of giving up your car, home, or some other important asset.
3. There are Options for Bad Credit
If you’re looking for a loan and you don’t have the greatest credit history, you may face some challenges along the way. Maybe you aren’t qualified for a loan with favorable rates, or maybe you’re having trouble qualifying for any loan at all. With how important your credit score typically is in determining whether or not your loan application gets approved, things can start to feel a little hopeless if you’re walking into the borrowing process with bad credit.
There may be borrowing options out there for you, particularly if you’re looking for small personal loans online with bad credit. There are financial institutions that either service or offer online loans that are specifically meant for people who are looking for borrowing options but don’t have the best credit scores. These organizations may not weigh your credit scores as much as certain others, and instead will place more emphasis on things like your level of income, your employment situation, and some other key factors. So, if you’re looking for a financial boost to help you take care of an emergency expense, you may be able to find small loans online with bad credit.
What are the Requirements to Apply for Small Loans Near Me?
If you feel like a small personal loan is the right choice for your situation, you should keep in mind that the requirements to qualify for a loan won’t necessarily be exactly the same with every financial institution. There will more than likely be some overlap in qualifications and most organizations will look at things like your income and employment to assess your creditworthiness, but you should still find out what the specific requirements are for each financial institution that you apply for a loan with or through. For example, they may look at:
- your state of residence
- your employment status
- your income
Consider Small Personal Loans Online for Emergencies
No one likes to have to deal with the financial fallout of an emergency situation, least of all people who don’t have a lot of extra money to spare. While building up your emergency fund is always a good idea, this usually takes a lot of planning and diligent saving. If you find yourself without the savings to handle an unexpected expense that needs to be dealt with right away, a small personal loan may be able to help! Make sure to go online, research your options, and find something that’s well-suited to your situation.