Small Personal Loans
Small personal loans are unsecured loans wherein the loan amount usually ranges between $500 and $5,000 and the repayment term ranges between 2 to 3 years, which subsequently ensures that the monthly repayments of the loan are very low and affordable. You can take out a personal loan for a variety of purposes, including for auto repair, unexpected expenses, holidays, weddings, medical bills, and debt consolidation, etc.
Small personal loans come with a lot of advantages such as:
- They are easy and quick to avail
- They are unsecured and thus borrowers do not have to provide collateral
- Time repayments can help improve the credit score
- The interest rate is usually low, especially for those with good credit
- The repayment term is not more than 2 to 3 years.
Advantages of small personal loans over credit cards
Whenever an unexpected expense occurs, we usually think of putting it on our credit card. It is true that credit cards can cover that emergency expenditure, but we often end up paying a significant amount of interest on the amount charged on the card till that amount is fully paid off.
On the other hand, small personal loans come with a low and fixed rate of interest as well as a fixed sum that needs to be repaid every month for the term of the loan. Borrowers can select the tenure of the loan and repay the personal loan at an affordable interest rate.
It is however important to remember that people who are thinking of repaying an emergency expense within 1 or two months, then using the credit card is a better option.
Advantages of small personal loans over payday loans
People can avail of small personal loans only after lenders scrutinize the credit history of the burrower, and often, only those with good credit get approved for a personal loan. Contrarily, payday loans do not require credit check and just minor paperwork and proof of regular income.
The above may indicate that payday loans are better than small personal loans. It is however important to note that payday loans feature extremely high interest rates, increased charges, and excessive fees. Borrowers of payday loans have often fallen into a debt trap after taking out a payday loan.
As mentioned above, small personal loans have a low interest rate, set term, and affordable monthly payments. The associated fees and other charges are also lower.
Uses of small personal loans
People commonly take out small personal loans for the following purposes:
- Home equity loans can help pay for renovations like building a pool or repairing the roof, etc. Homeowners who have very little home equity can take out a small personal loan and carry out home repairs which simply cannot wait.
- Small personal loans can help cover emergency medical expenses not covered by the health insurance company
- It can be used to pay off debts with high interest rates, especially credit card debts.
- It can be used to purchase a boat, an RV, or a new car
- It can be used to pay for a vacation, wedding, honeymoon, or a funeral
- It can help cover relocation costs