Financial Literacy
When things get tight financially and urgent expenses need to be covered, it’s not uncommon for people to consider taking out a loan to help get through the rough patch. What they may not know is that when it comes to taking out a loan, you don’t always have to apply for a huge loan amount – a small personal loan could be the perfect fit.
While small loans come in many different forms, the most common is the personal loan. In general, small personal loans don’t exceed amounts of about $3,000, and they’re usually not tied to specific expenses like home improvement or secured by collateral. In this article, we’ll review small personal loans, how they could prove useful to you, and where you can apply for one.
Where Can I Get a Small Personal Loan?
Small personal loans are typically offered online by various online lenders. While it’s possible to get these loans from a traditional bank or credit union, they may be less flexible and have higher interest rates than online lenders.
With online lenders, the application and approval process is completely online and correspondingly fast. In some cases, you could even expect a same-day disbursement.
How Do Small Short-Term Loans Affect Your Credit Score?
The impact a small personal loan could have on your credit score depends on how you manage to pay your debts. With each amount you borrow and repay according to the agreed loan terms, your credit rating could improve. On the other hand, your score may be negatively impacted by every late or missed payment.
Can I Get Small Loans with Bad Credit?
While it may be possible to get a small personal loan with poor credit if your debt-to-income ratio is relatively good, you should still be prepared to pay higher interest rates. Overall, these interest rates should still be lower than those of payday loans or title loans, and due to the small loan amount, the monthly payment is likely to be low as well.
How to Get a Small Loan to Build Credit
Building credit without a credit history can be tough – especially when it comes to getting approved for loans or credit cards. Your credit history has such an impact on your financial life that in some cases, you can’t even rent an apartment without showing your history of responsible repayment first.
This is exactly why there are personal loans with a small loan amount. With the help of these personal loans, you could convince future lenders of your trustworthiness through your history of on-time payments.
With a small personal loan, you don’t have to stress about juggling large sums or making unmanageable monthly payments. In addition, the requirements for these personal loans may be easier to meet. If you don’t meet the necessary requirements, it could be worthwhile to use a co-applicant or co-signer to build up your credit.
How Do Small Personal Loans Help with Debt Consolidation?
Taking out a personal loan to consolidate credit card debt could make sense, especially if you could save money with their typically lower fees and interest rates. With that said, it’s always worthwhile to consider your options before making a decision.
Of course, debt consolidation is possible with long-term loans as well – it really comes down to how much debt you plan to pay off. If you’re simply looking to consolidate a few thousand dollars worth of debt, a small personal loan could be an exceptional option.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.
