Small Personal Loans
Sometimes in life you need a loan, but you don’t need a lot of money. All you need is a small personal loan. Everyone has their own unique financial situation. That’s why loans come in many different forms and are able to serve almost any credit need. If you need money to buy some furniture, need to cover an emergency expense, or just want to go on holiday, then you should consider a small personal loan.
Before we continue we have a quick warning about borrowing. You need to ask yourself if you really need a loan today. Borrowing a small amount of money can be expensive and it may not solve the money problems you’re currently facing. Please check the options you have before deciding on taking out a loan.
If you would like more information about alternatives to borrowing and ways you can manage your bills and debts then please call 1800 007 007 to get free independent financial advice. If you’re having trouble paying your utility bill then talk with your suppliers for electricity, gas, water or phone company to see if you can arrange a deal. If you are on government benefits and you need money fast you can phone 13 17 94 to see if you can have your Centrelink payment sent early. If you’re unsure then head to the MoneySmart website provided by the government to find out more information about small loans and alternatives to them that could be a lot of help.
What are small personal loans?
A small personal loan is a loan for a small amount. It’s typically between $100 and $2,000. A small personal loan is different from a regular loan because they usually come with shorter loan terms. They tend to be more flexible too. These kind of loans are often offered by the less traditional lenders.
While it is true that you can get a small personal loan from a bank they aren’t that small really. You’re looking at a minimum loan of anywhere between $3,000 and $5,000 when you use a bank.
The options you have for a small personal loan
If you want to get a small personal loan then you do have some different options available to you. They are all different and you’ll have to pick the one that best fits your needs.
A payday loan is a short-term loan for a small amount that can be used when you need some extra money before payday rolls around. Payday loans are also a good option for people who don’t have great credit ratings. They focus more on your current financial situation and ability to repay the loan over your negative (or positive) credit history.
An overdraft is when you withdraw more money from your bank than you actually have in your account. It’s typically a small amount that can be anywhere between $100 and $1,000. How much you can withdraw is set by your bank and the money comes with fees and rates.
A line of credit is similar in principle to an overdraft. The difference is that a credit line isn’t attached to your bank account and you can potentially borrow more money with a credit line. You can withdraw up to a certain amount of money on a set rate but the rate will be charged only on how much money you withdraw.
A cash advance is when you withdraw money from your credit card. Money from a cash advance accrues interest instantly and the rate could be higher than 20% p.a. So be careful when getting a cash advance and learn as much as you can.
How to compare small personal loan options
A small personal loan is just like a regular loan in that you are charged fees and rates to borrow money from a bank or other lending institution. There are some elements to a small personal loan that you can learn about below. These will help you compare the loan options and choose the best loan for you.
- What fees are on the loan?
Lenders will place fees on the money that you borrow. You need to check out what the upfront fees are. These are establishment fees. You also need to know the ongoing fees such as annual or monthly fees. There may be other fees attached to your loan too, such as a fee for repaying the money early.
- What is the loan term?
Typically a personal loan will come with a loan period of up to seven years. Small personal loans are much shorter and come with terms of between 16 days and up to two years. Ask around about different loan terms and find the one that sounds best for you.
- How do you apply?
Because small personal loans are for shorter terms a lot of lenders are online businesses. They have quick and easy application forms and can approve you instantly, providing you with the money within a matter of hours. Have information about your personal and financial details handy when you apply to speed up the process.
- How large are the repayments?
Different loans can come with different repayment amounts. There are lenders that will arrange the repayments in line with when you are paid and how much. There are also lenders that may let you repay faster or borrow back the money you’ve already repaid. This is known as a redraw.
What to Avoid
When you apply for a small personal loan you need to work out how much you’ll be paying with fees and rates. You should be able to afford a loan before you take it out. You also need to ask yourself if you really need to take out a loan. Is what you want to buy really necessary? If it’s not something you need urgently then you should consider just saving the money instead.
Avoid getting into debt: You need to think about your current financial situation and ask yourself if the loan is something that you really need. If you’re using the loan to pay the bills or rent then you can ask your landlord or the utility provider for a little extra time to put the money together. They may also be willing to set up a payment plan with you.
Applying for to many loans at once: Remember that every time you apply for a loan it is listed on your credit file. If you apply for too many loans then it looks bad on your profile and makes you look like a financial risk. If you’re interested in getting a loan you should never apply for every loan you find. Only apply for a second loan if the first is rejected. Keeping your credit file clean like this can help you get a loan in the first place.
The Pros and Cons of Small Personal Loans
You get access to money quickly: With a small personal loan you get the money quickly. There are lenders that can get you the money within 60 minutes. Though there are conditions to such a loan of course.
You borrow only how much you need: If you need to borrow a small amount of money then you obviously don’t want to be stuck with a loan of thousands of dollars. Borrowing only how much you need makes more sense and a loan like this is easier to repay.
Clear repayment periods: When you take out a small personal loan the repayment period will usually be when you next get paid. Sticking to a budget means that you can get your loan repaid quickly and easily.
Higher Fees: A big drawback to these kind of loans are the higher fees. They have higher fees because the repayment period is so short so the lenders have to make money somehow. It also helps to protect he lender if you pay late or default on the loan.
A limited choice in lenders: If you’ve got a troubled financial past, a poor credit rating, or are on low income, you’ll find your choice of lenders limited. This makes it all the more important that you see what options you have before committing to a lender.