Sometimes you may find that you’re in need of extra cash, but that doesn’t necessarily mean that you need thousands of pounds to pay for the item you want. Though some loans like mortgages and car loans can be quite large, other loans are simply required to help you make ends meet over a short period. Unfortunately, it’s worth noting that the cheapest loan arrangements are generally reserved for people who borrow larger amounts – and have a good credit rating.
That being said, you will still have options available to you if you want to borrow a small amount – particularly if you have a good credit score too.
Understanding a Small Loan
While some loan providers are willing to quickly process small loan requests without much off a problem, you might find that others take more time to get the details of your loan sorted out. Depending on who you go with for your small loan, you might be able to get cash into your account the same day, or you may find yourself waiting for weeks before you see the cash you need.
Importantly, if you need money instantly for something – like a medical expense or a broken washing machine, then you might need to double check when you can expect to get the money before you apply for your loan. Remember, with personal loan amounts it’s also worth checking how much you will be allowed to borrow. Usually, the amount you can access will depend largely on your credit score and your existing commitments.
Small Loans and your Credit Score
One thing that many people worry about when they’re taking out a small loan – is how much they will be affected in terms of their credit history or credit score. Any kind of borrowing – no matter whether you’re borrowing for a mortgage, or a credit card, will be noted on your credit file. In other words, this means that lenders and banks will be able to see if you’ve borrowed money successfully and how well you paid it back.
Although borrowing too frequently could reduce your chances of being accepted for further credit during the span of your loan, the long-term impact of a small loan when it comes to addressing your credit score will largely depend on how you manage the money that you borrow. Essentially, the best thing that you can do is make all of your payments on time. This way, you could even potentially improve your credit score!
The Alternatives to Small Loans
Because small loans can be so expensive in terms of high APR and interest rates, it’s usually a good idea to check and make sure that no other options are available before you start applying for your loan. A good way to do this is to ask a close friend or relative to lend the money you neeed for a short time. On the other hand, you could always consider using the overdraft facility on your current bank account.
A lot of current accounts come with an overdraft facility as standard, and most will charge 0% interest as long as the amount that you borrow doesn’t exceed a certain limit. If you are disciplined, you may also find that you can pay off and overdraft far quicker than a personal loan, which means that you cut down the amount you spend I n interest.
Additionally, some providers will offer 0% credit cards that allow you to gain access to small amounts of money for a certain period of time without any interest charges. Crucially, however, you will need to make sure that you pay off the amount you owe on your credit card as quickly as possible if you want to avoid building up extra charges. However, if you simply need cash until a pay check comes through, then a credit card or overdraft facility could be the best solution. Some credit cards are currently offering a period of up to sixteen months of interest-free spending which can be very beneficial for people who only need access to an extra amount of cash for a short period of time. Just be careful, as after your free spending period is over, the interest can rise dramatically.