No matter where you are and where you live, you’ve probably heard about how complicated lending and loans are. There are a lot of issues surrounding itafter all, as well as many nuances that it can be hard to be aware whether you’re just getting started in the realm of finances or even if you’re an expert. For instance, did you know that there are differences between small loans, microloans, and “regular” consumer loans?
Each has its own peculiarities to be aware of, although it can be hard to keep track of in many circumstances. Today, we’re here to discuss small loans in specific, which is just a way to define credit agreements that have a lower limit to how much we can borrow. There are pros and cons to them, as you can probably imagine.
What are Small Loans?
Before we can tackle anything else today, let’s take a moment to examine what small loans are, and why they’re considered in a specific category of their own. For one thing, it’s important to keep in mind that they’re still a type of personal loan.
Personal loans are pretty much what they sound like on the tin. They’re a type of credit agreement that individuals can get without having to worry about spending that money on a hyper specific purpose that was detailed by the lender. They’re different from something like a mortgage or a car loan for that reason, because while those are under the umbrella of consumer loans, they aren’t classified as personal ones.
With that out of the way, just remember that small loans are personal loans. We can use them for just about anything that we want, which can be a bit of a trap in some sense. We’ll explain more about that later, but for now, know that it’s critical to borrow money responsibly.
What qualifies as “small” will probably depend on where you’re aiming to get the loan. For instance, any credit agreements between 70,000 USD or 100,000 USD could technically count, although it will probably be at the lower end of that spectrum. Here in Norway, usually anything that’s lower than 20,000 NOK will stray into the territory of microloan, which is even smaller of course.
What Can We Use Them For?
As far as smålån på dagen go, the next question that most folks have is what we can possibly use them for. There are a lot of options, after all, and it can feel almost overwhelming. What you’ll want to keep in mind is that you don’t have a specific reason to borrow money, then it may not be the best idea to do so.
With that said, there are plenty of things that we can do with these types of loans. Some examples include if you’re making changes to your home or if you’re intending to go on a vacation but don’t have the immediate funds to make the downpayments you need. Of course, the key to all of this is that you know you can afford these things and thus can afford to make the repayments that will be involved.
Vacations are a popular choice because let’s face it, they can get pretty expensive. That’s especially true if you’re planning on bringing the whole family along. While we wouldn’t necessarily recommend that you borrow 150,000 NOK to plan a trip, a small loan (one that’s above 20,000 NOK but below the hundred thousand mark) could easily fit into many lifestyles.
In a similar vein, another common reason to take out these smaller credit agreements is if you’re going to be planning a wedding anytime soon and would like to have everything pre-paid and laid out in advance as soon as possible. It can be difficult to do so all at once and up front without borrowing money at some point, so there’s certainly no shame in applying for a loan for that purpose.
While there are obviously tons of reasons and motivations for small loans, the final one that we’ll be touching upon today is if you’re planning to renovate your home any time soon. This can go for furniture or other types of renovations – even adding a room or a deck onto your house in some cases.
In fact, this last reason is easily the most practical of the ones that we’ve discussed today, although that doesn’t mean the other ones aren’t valid. You see, if you’re renovating your home, you’re typically adding some value to it. Even if you aren’t intending to sell any time soon, it can still be seen as a worthwhile investment, and thus the loan is worth it.
Before we continue with how to qualify for these small loans, particularly if you are applying for a “same day” one, it’s important to cover this simple fact: when we borrow money, we need to do so responsibly. If not, then we could easily end up getting in way over our heads, and that’s not a situation that anyone wants to end up stuck in.
Additionally, keep in mind that paying off a loan early may not necessarily be in your best interest either. As you can see on this page: https://www.consumerfinance.gov/ask-cfpb/…is-my-payoff-amount-the-same-as-my-current-balance-en-205/, sometimes there are additional fees for ending a credit agreement early so that the lender doesn’t lose out on the revenue they expected to come from interest.
There are a lot of movingparts with small loans. It can be difficult to keep track of all this, which is why it’s worth mentioning. Always do your best to ensure that you’re not going to borrow out of your price range, because that’s where people can get into some serious trouble.
Qualifying for Small Loans
For our next topic today, let’s discuss how qualifying for these sorts of credit agreements works. Unfortunately, it often isn’t as simple as submitting your application and calling it a day.
Rather, there are prerequisites for most lenders, and they’ll often tell you that on their websites. However, this isn’t the easiest thing to spot, especially if you’re not overly financially savvy. If you’re aiming for a same day loan, then the requirements will likely be even stricter. Allow us to explain.
Perhaps the most important aspect of qualifying for any type of loan is this: your credit score. These are tracked and calculated by the biggest credit bureaus across the globe, and they go on a scale of four hundred and fifty to eight hundred and fifty (generally speaking). The higheryour score, the better chance you have of being approved for the loans that you apply for.
This is because our credit scores are a reflection of how well we handle our debt. From paying bills on time to making repayments, all of those transactions reflect positively on our score. Missing repayments can be quite dangerous, though, and impact it negatively.
The lower your score, the lower chance you have of approval. Beyond just that, you’ll likely also end up saddled with higher interest rates if you do get approved. That’s because you’re a riskier borrower to work with from the standpoint of the lender.
Interest rates may not seem like a big deal at first, but they have a strong impact on how much you’ll be paying over the lifetime of the loan. Obviously, the higher the rate the more that you’re paying, especially if you end up with compound interest (which is what most of us end up with).
Are Small Loans with Same Day Applications Worth it?
If you’ve made it this far and are still uncertain about whether or not a small loan is something you should pursue, don’t worry – we’ve got you covered. For the most part, this will really depend on whether or not you are going to be able to afford the repayments in question.
You can get estimates on what those would be on all sorts of websites, just make sure to fill in your information into the calculators as accurately as possible. From there, you can consider your current budget and determine whether or not you’ll be able to afford the credit agreement you want.
Remember – ideally, this loan won’t result in you having to change your current lifestyle just to afford it. If that’s the case, there’s a chance you may want to rethink your plans, at least to an extent.