Originally Posted On: https://www.matchfinancial.com/how-do-small-personal-loans-work/
There are times when you just need to have a bit of cash on hand. When you need money in hand, a small personal loan may be more desirable than other lending options including payday loans or charging up a credit card. To find the best option for you, you must understand how small personal loans work.
While there is no specific definition of what constitutes a “small” personal loan, the term is usually used to describe a loan of less than $3,000. This is loosely defined by the industry as many financial institutions only make loans for more than $3,000 or in some cases $5,000.
However it is possible to arrange a loan that is $2,000 or even $1,000 or less. There are several banks and peer-to-peer lending options that can arrange small personal loans if you meet eligibility requirements. The terms of these loans will vary based on lender, but are tied to your credit worthiness and income in most cases.
Lenders will use your credit score and income to determine loan terms including the APR, length of the loan and loan payment amounts. Since lenders have different requirements and expectations, it always makes sense to shop around a bit to find a loan that best meets your individual needs.
Many lenders for small personal loans are online. That means you can apply for a loan in the evenings or weekends and if you meet specific requirements you may not need to have any face-to-face meetings or be required to scan or send any documents. You can expect every lender to check your credit as part of the application process and you may be required to provide verification of your income as well.
You can find small personal loans in many different places. Some of these loans are secured, or tied to your assets like a car or mortgage, and others are unsecured and guaranteed only by your credit score and signature. You can find small personal loans from many lenders, both conventional and not.
Generally you want to consider a few key factors when applying for a small personal loan.
When used correctly, a small personal loan can help you clear an expense without devastating your budget. You can arrange payment in a timely manner, keep yourself on track and even build your own credit score by diversifying your borrowing profile.
From how to use personal loans to ways they can help you to pay off debt and more.
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