Some expenses can break the bank if you shell out money from your savings. Small personal loans can help you break down the cost of expenses into convenient, affordable monthly instalments over a fixed period.
Unlike mortgages or auto loans, personal loans are not earmarked to solve a pre-set financial purpose. A small personal loan can help you solve a multitude of purposes – minor home improvement projects, emergency medical bills, vehicle repairs or debt consolidation.
Read on to find out what you can use personal loans for and how to apply for them online.
What exactly are small loans?
Small loans are small, short-term personal loans designed to help you deal with small expenses – car repair, medical bills, household cash crunch, and small-scale home improvement expenses. The typical loan amount for a small personal loan is usually under £2000. Depending on the loan’s tenure, small loans make it easier for you to afford monthly instalments.
Small loans usually have higher interest rates than personal loans. But it is your credit score based on which lenders set interest on loans. A credit score is a peek into your financial standing. Lenders assess the risk of lending based on your credit score. Therefore, a good credit score can open more horizons, increasing your chances of qualifying for better rates. On the other hand, a bad credit score is a risky proposition for the lender, so they tend to set a higher interest rate.
Since the loan amount is small, the pay-out for small loans is usually quick. Once you have the money, you can use it at your convenience. However, you should use the loan responsibly and for the specified purpose. You can use small loans as an opportunity to boost your credit score. Making timely payments will help you raise your credit rating. Setting up direct debit payments for your monthly instalments is a good way to ensure timely payments.
Making timely payments is a prerequisite for a good credit score. Lenders report your payment history to credit bureaus. While a timely payment improves your score, each missed repayment stays on your report as a negative item, damaging your credit rating. If you consistently fail to make timely payments, the lender may get a County Court Judgement issued against you. A CCJ stays on your credit file for 6 years, hampering your chances of securing credit in the future. This might hold you back from fulfilling major life goals and reaching financial milestones. Thus, it is vital to make your payments on time.
Where can I find small loans (UK)?
- High-street banks
- Online lenders
- Online brokers such as Oyster Loans
- Building societies
- Credit unions
- Dedicated lenders
- Secured loan providers
- Government grants or schemes
Can I borrow small loans for bad credit?
Finding a suitable loan offer with a low credit rating can be a piece of work. You can certainly apply for small personal loans even with a low credit score. However, you may not be able to qualify for lower interest rates and better terms.
Bad credit shouldn’t keep you from availing of financial opportunities. Oyster Loans is an FCA approved broker in the UK. We provide our customers with personalised loan offers in accordance with their credit score and financial circumstances. Our panel of FCA-approved lenders cater to a variety of credit seekers. Compare loan offers from multiple lenders to find your ideal loan.
Should I consider small payday loans?
Payday loans are a form of high-cost short-term credit that you can borrow to keep your head above the water during a personal financial crisis. Most people borrow payday loans to regulate their daily household cash flow since the loans have faster pay-outs. You can pay off a small payday loan within a week or a month.
Payday loans may not be the best option for borrowers with a low credit rating because these loans have excessive interest rates and APRs. The average APRs for payday loans often exceed 300%. However, since these loans have a quick disbursal time and greater accessibility, people continued to borrow them despite the alarming interest rates. Seeing the unchecked growth in the popularity of payday loans, the FCA capped the price of these loans to safeguard the interest of consumers.
For every £100, the lender cannot charge you more than £24 for a loan with a term of 30 days. If you miss a payment or fail to repay on time, the maximum penalty that a lender can impose is £15, plus the interest on the amount borrowed. The price cap also ensures that you do not pay more than twice of what you borrowed.
What can I use small personal loans for?
People use small loans for a variety of purposes, some of which are listed below:
- Minor home improvements
- Repair works – vehicle or home
- Debt consolidation
- Settle emergency medical bills
- Cover wedding expenses
- Purchase a new appliance
- Buy business equipment
How to apply for quick small loans?
The application process for quick loans is pretty straightforward. Here are some easy-to-follow steps for your assistance:
- Figure out a loan amount: Assess your income and expenses to work out a suitable amount for your loan. Try to borrow an amount that you can afford to repay in the foreseeable future.
- Check your credit standing: Checking your credit score should ideally be a regular practice. Plus, you will know what to expect when you start applying for loans. A regular evaluation will also help you improve your credit score and help you stay on the right track.
- Complete the online application: Online portals make it way more convenient to apply for loans. Ensure that you file your application meticulously, with all the updated information and documents. Loans comparison platforms like Oyster loans can help you compare multiple offers from a panel of FCA approved lenders. Find your ideal loan offer with Oyster Loans.
- Complete the lender’s agreement: After choosing an offer, the lender will run a hard credit enquiry to assess your creditworthiness and affordability. If approved, the next step is to complete contractual formalities with the lender. Now, the lender will disburse the money into your account via a wire transfer.
- Prepare a repayment plan: Once you receive the proceeds, you are free to use them at your discretion. However, it would be best if you spend this money responsibly. It would be wise to have a repayment plan ready before the beginning of your repayment period. Having a contingency plan will help you tackle unprecedented situations efficiently.
Small loans are a practical way of financing minor expenses through affordable monthly instalments. However, it is essential to remember that lenders charge interest for the loan’s entire duration. Therefore, it would be in your best interest to pay off your loan as soon as you can.