When people are going through a difficult financial situation, they often use the services offered by the loan lending industry and borrow small personal loans. When looking to get a small personal loan, a borrower can go to a bank or to his credit union. However, both these options may take too much time or have too many requirements. Most times, people need to deal with the emergency expense and waiting for days or weeks for financial assistance don’t work for them.
There are, however, a lot of lending companies who offer personal loans to their borrowers in the forms of payday loans, title loans, peer-to-peer loans or installment loans. Their service is not only a lot faster than your bank or credit union, but they also have fewer requirements. Now let us have a look at what a personal loan actually is and also the different types of personal loans that you can choose from.
What is a personal loan?
A personal loan is an unsecured loan that does not require the use of any collateral as insurance in exchange for the amount of money you get. The amount of a personal loan can range from $1000 to $50,000. The terms, of course, can be different with each loan depending on the loan lending company and the person’s income and credit card score. Personal loans, unlike credit cards, are one-time loans, which means that you cannot borrow over and over again. In case you need more money, you will have to apply again.
Usually, personal loans have fixed interest rates that stay the same throughout the whole period of the loan. Much like with the loan amount, the interest rate on each loan can be different based on the loan lender and the borrower’s specific financial situation. If you are getting a personal loan from your bank, the better your credit score is, the better loan conditions you will get (this includes lower interest rates).
Personal loan options
When you think of applying for a small personal loan, here are the options you can consider:
A payday loan is a short-term, small-sum type of loan (also known as a cash advance) where the borrower takes out an amount of money (usually not exceeding $500) which he then must repay in full by his next payday. The length of a payday loan usually varies between two weeks and a month. Payday has higher interest rates than most loan types.
Debit card payday loans
Debit card payday loans are similar to standard payday loans. But with them, the payday loan lender gives you access to your funds via a prepaid card. What you can do with this card is to withdraw cash from an ATM or use the card as a quick way to get access to funds in your future loan applications.
Installment loans usually allow you to borrow a bigger amount of money than payday loans do.
The repayment is done through fixed amounts (installments) over a period of time. The term of an installment loan can vary from months to years.
Car title loans
If you own a vehicle, you can apply for a vehicle title loan. In this case, the title of your vehicle will be used as a collateral to secure the loan. The repayment of the loan is in installments. With title loans, you can get a better interest rate compared to what you can get with a payday loan because you provide some kind of loan collateral.
This type of loan is normally for people with good credit scores. Such loans are funded by individual investors (peers). You submit your application online, after which one or few peers decide to finance you. The annual percentage rate on such loans is directly impacted by the state of your credit score. Usually, the APR on peer-to-peer loans is lower than payday loans. With peer-to-peer loans, you can usually borrow an amount up to $35,000.
What do small personal loans have to offer?
If you are thinking of applying for a small personal loan, here is what you need to think about:
Check and compare the different interest rates that different loan lending companies offer. Finding the right lending company to work with is crucial when taking out a personal loan. Some lending companies may offer you an annual percentage rate based on your specific situation while others will offer you the standard industry rates.
The speed of the service
The speed of your small personal loan application and the time it takes for the loan lender to transfer you the money are very important. When you are dealing with an emergency, you cannot really afford to waste time.
With small personal loans, you are able to apply by visiting a lender’s physical store or by submitting your application online. While both types of application are very quick and simple, by applying for your small personal loan at a lender’s on-ground store, you will most likely get your money as soon as within a few hours. When applying online, you may have to wait until the following business day. Peer-to-peer small personal loans usually take more time, so that may not be the best option if you need to act fast.
Is it ok to have bad credit?
While getting a small personal loan from a bank with a bad credit can be quite difficult and sometimes even impossible, getting a small payday loan or an installment loan with bad credit from a payday loan lending company should be pretty easy. Most payday loan lending companies are interested only in your ability to repay the loan on time. So as long as you have a steady source of monthly income, you should be able to get approval for your loan without any problem.