Many consumers thinking about making a small home improvement, behind on bills until their next paycheck or in need to pay a minor expense, are finding personal loans as the new answer to their problems.
Small cash loans are a hot new trend with consumers who find the need to buy a needed appliance or fix the house are leaving credit card charges and home equity loans behind in support of cash loans, also called small personal loans.
Personal loans are defined as unsecured loans which are loans from a lender, typically a bank or financial institution, that are not secured to collateral. Mortgage loans, on the other hand, are an example of secured loans. The borrower receives a loan from a bank, providing the borrower supplies the lender a lien to the property until the loan is paid off in full. Unsecured payday loan rates are usually similar to credit cards interest rates, which are much higher than secured loan rates.
Typically, to be eligible for a personal loan, consumers have to satisfy these criteria:
- Borrower must be at least 18 years old
- Borrower must have an active bank account at least 30 days old
- Borrower must be employed with a minimum recurring monthly income of $1,000
- Borrower must show one form of identification
- Borrower must show proof of residency (optional)
- Borrower must be a citizen of the U.S. (optional)
- Short-term unsecured loans are offered by 97% of credit unions with the average amount borrowed at $2,300. Approximately 60% will provide loans for less than $500 and roughly 20% of credit unions will offer unsecured loans below $500 with no credit check.
If you are in taking out a personal loan, the first thing you must decide is how big of a payday loan you really need to take out. A good question to ask is: what is the smallest amount of money you need to get you through? If your answer is pretty large, you may want to first consider other borrowing alternatives. Shopping for free online payday loan quotes is always one of the easiest and helpful things you can do before committing to a loan.
Things to keep in mind before finalizing a small personal loan:
Personal loan interest rates, also known as Annual Percentage Rates (APR), is the first and easiest factor in determining a deal. Trusted payday lenders will offer competitive rates, so shop around with free quotes to determine what the going rate in your area is. Be sure that all rates are viewed in a standard format, i.e. monthly rates should be calculated into an annual format.
Repayment terms should be noted before you sign anything. Determine how much time you have to repay the loan and if there are any penalties. Some loan contracts do not allow you to add extra money on your payment, forcing you to pay long-term interest rates.
Bigger is not always better. Some institutions work on a commission basis and the more money they can squeeze out of you, the more they make. State regulations can be more lenient with larger loans as well. Additionally, be wary of the total cost of the credit, not just the monthly payments. Sometimes a lower monthly payment is not always better if the repayment terms are lengthy.
Check for associated fees and any hidden charges. Typically, predatory lenders will try to hide fees into special clubs, credit insurance and additional bonus fees.
Beware of the bait and hook. If your contract and your loan officer are telling you two different stories, don’t sign the dotted line. Predatory lenders will say anything to close a deal; what really counts is in the writing.
Before finalizing your personal loan, determine the time length for the application to be processed. If your loan is needed for an emergency situation, a prolonged processing period would defeat the point of the advance.
Here are the advantages of a small personal loan:
- Quick approval
- No credit check
- No application fee
- Confidential & secure
- 100% online – cash in your bank account overnight
Typically, you won’t have to worry too much about predatory lenders if you go to a trusted business or bank with multiple locations. It is always beneficial to read of the fine print though, regardless of the loan amount or lender. So, if you are in the market for a small personal loan or quick improvement, personal loans can be a great start to getting over life’s financial bumps and improve your credit score.