We often come across emergency situations such as hospitalization bills, car repair, etc., when our savings are not enough to cover such expenses. In such situations we typically require a small amount of money to help bridge the gap between savings and unexpected expenses.
We may borrow cash from friends or family or take out a loan from traditional sources like banks, etc. However, if you do not have access to money from family or friends and/or if you have bad credit, then these sources of loans may not be available to you. This is when you can opt for a small loan online to get the funds required for emergency expenses.
What are small online loans?
When we talk about ‘loans’ we often think about big loans such as home loans or auto loans, etc. It may however be noted that there are many lenders who offer loans of small amounts to borrowers who need it. Such small loans are short-term loans and have to be repaid within 1 to 2 weeks. Borrowers of small loans will have to repay the loan amount plus interest charges and a minor fee.
Some of the benefits of small online loans include:
- You do not necessarily need to have good credit. Lenders typically do not carry out a hard credit check
- You can apply online from the comfort of your home, from your computer or on your mobile.
- The application process is easy wherein you need to fill a simple form with some personal and financial details.
- The approval process is quick and sometimes the small loan may get approved on the same day itself.
- All the fees, interest, and other applicable charges are clearly mentioned in the small loan contract. There are no hidden fees.
- Once the small loan is approved, the funds are transferred to your bank account in 1 to 2 business days.
- Some lenders report the repayment history of borrowers to the credit bureaus. Thus, a good repayment history of small loans can help build up and improve your credit score.
Different types of small online loans
Listed below are a few types of small loans:
- Small loans are often based on income and traditional personal loans are based on credit score. Sometimes even these are not sufficient and lenders may ask for collateral against the loan. Personal loans given out against collateral are called secured loans.
- Unsecured loans are small loans given by the lender without any security/collateral. The amount that you can receive as unsecured small loans is usually lower than that of secured loans. Also, the interest rate for the former may be comparatively higher.
- Co-signer small loans are loans that require a borrower to apply for the loan with another person. The lender will verify the income levels and other financial details of both the borrower and the co-signee to determine the amount of money that can be given as loan as well as other terms of the loan. Both the borrower and the co-signee are responsible for repayment of such small loans.