If you are facing some cash shortage until your next payday, then you may have searched for online loans. You might be looking for only a small amount and traditional institutes like banks don’t do such small amounts. So where do you go? The answer could be payday loans or small personal loans.
What exactly is a small loan?
A small loan is a short-duration loan of a small amount. Small loans are normally unsecured and have a high rate of interest associated with them when compared to bank loans. One of the most well-known types of small loans is the payday loan. A payday loan’s duration is until the next payday of the borrower.
Certain lenders now provide some flexibility in their loans and give the borrower the option of choosing a reasonable time frame in which he/she can repay back the small loan.
How to become eligible for a small personal loan?
The main factor that small loan lenders evaluate is whether a borrower can repay the small loan that is being lent out. When you request a personal loan, make sure that your form has complete and accurate information. You may also have to provide a copy of your payslip and a national insurance number.
Can I take more than one loan at a time?
It is possible to get more than one personal loan at a time. However, your financial condition needs to demonstrate that you can handle multiple loans and repay them back.
If the lender finds that you are not in a position to repay back your existing loan, then the lender may turn down your loan request for an additional small personal loan. If your request is turned down, then your credit score might take a hit as well. So, it is always recommended to avail of only one bad credit small loan at any time.
Is it possible to get a small loan with bad credit?
From a lender’s perspective, lending a small loan or any other loan to a borrower with bad credit is not an easy task. However, with a few pieces of information, you can convince lenders to offer you a small loan. You need to show details and proof of your income. If your source of income and income levels are steady, then it gives the lender some confidence that you are capable of repaying back the loan.
You have to demonstrate to the lender that you can repay back the loan and repay it on time. For that purpose, any track record of timely repayments of previous loans helps. Small loans are short-duration loans and are generally due to be repaid back within a few weeks.
What happens if I cannot pay my loan back?
If you cannot demonstrate that you will be able to repay back the loan within this relatively short time frame, then the lender will be likely to turn down your loan request. However, if you can assure the lender about your ability to repay as well as your financial situation, then your request may be approved.
Just because these loans are sometimes known as bad credit small loans, it does not mean that anyone with bad credit and unemployment will get a loan. These online quick loans are possible provided that you pass some basic checkpoints.
From your end, it is in your interest to keep all your financial, personal, and employment records organized. If you can quickly provide this information in the manner in which it is requested from you, then getting quick approval for a bad credit small personal loan becomes that much easier.
What are the benefits?
Small loans- benefits for the borrower:
Firstly, these online small loans are quick. Unlike traditional banks, online lenders have the entire process online and with relatively lesser hurdles and paperwork. You can pretty much request a loan online and if everything is in order, then the loan approval happens in minutes. If you then accept the loan offer, then there is every chance that the loan amount is disbursed within one business day.
Secondly, online small loans are for small amounts. Traditional institutions like banks might not offer loans for such small amounts. But these amounts are sometimes necessary to meet immediate expenses or plug a short-term shortfall. These loans make it possible.
Thirdly, depending on the lender, the terms of repayment for online small loans can be quite flexible. With payday loans, the due date is the next payday. However, in the case of loans, you might be able to request the lender to give you a longer duration to repay the loan. The lender may even agree to allow you the repayment over two installments instead of one lump sum. For monthly installments, you can you these loans.
Lastly, small loan lenders might not conduct a hard credit check on your profile. A hard credit check requires the lender to pull up your credit report from one of the credit bureaus. That can pull down your credit scores. Bad credit online small loan lenders may only conduct a soft check.
With all of these benefits, online small loans are a decent option for someone looking for a quick short-term loan.
Selecting the best small loan offer
If you are lucky enough to have multiple offers for an unsecured small loan, then there are certain factors that you can consider in shortlisting the best options:
- The monthly repayment amount
- The interest rate or APR
- Any fees associated with the transaction or during the loan term
- The quality of the lender and customer reviews
- Whether the loan is repayable (yes, you need to check this too)
- How quickly the loan is processed and disbursed to you
- The loan amount being offered
- Any early repayment charges
- The eligibility criteria for a bad credit small loan
No matter the lender you choose, one thing that you need to be very careful about is your plan to repay the loan. If you do not repay back a small loan, then the effect on your credit score can be quite negative. Your bad credit may get even worse if you do not repay the loan on time.
Therefore you should opt for a loan and for an amount that you know you can repay back. Even before requesting an unsecured online loan, you should first figure out how you will repay it back.
- Find a lender
That brings us to responsible lending followed by small cash loan lenders
If you are thinking of availing of small online personal loans, then first analyze your financial situation. Make sure that you have enough money to pay for your monthly living expenses. Then you need to figure out whether there will be enough money left to make the loan repayments.
Particular attention also needs to go towards the loan amount that you seek to borrow. Regardless of what the lender offers you, it is always a good idea to only borrow what you need immediately. There is no reason to borrow more than the requirement. Otherwise, the repayment will get trickier. You don’t want to repay your loan late as that will pull down your credit scores. And you certainly don’t want to default on your loan because you will then have to face the debt collectors.
It is always a good idea to explore all your options, including the ones beside a small online loan.
I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go. I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.