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Are Small Loans Worth It? Things You Should Know

Posted January 19, 2019 by EasyFinance.com to Banking 1 0

A question most people will have at one point or another in their life is “are small loans safe, what are the good and the bad of taking one.”

While there are obvious advantages and disadvantages, the idea of debt or defaulting on a loan is generally anxiety-inducing for most people- and for good reason! To have a perfect credit score, and not have to deal with the threat of collections, you must be responsible for every financial move you make.

However, we also understand your responsibility may be more immediate, and having a small loan may be the solution to your current problem.

Downsides of Personal Loans

The very first thing you should understand about the loans are the disadvantages of taking them because it only makes sense to know those first. First off, interest rates tend to err on the higher side. Personal loans are unsecured, meaning that unlike a mortgage, or a car loan, there isn’t actually any tangible “real world asset” to be collected on should you default.

Generally speaking all loans that are unsecured tend to carry higher APR rates, so your typical unsecured loan should be evaluated. Borrowers with excellent credit scores between 740-850 have received APR rates as low as 8.18% and framing this up better you have to realize that even at the high end of 23.99% APR on a $1,000 loan that may be the solution you need to an immediate issue, that you would only pay under $100.00 a month for 12 months, with a total finance charge of $134.65. Split $134.64 up over 12 months and you really are only paying $11 more a month for a financed $1000.00

When put into perspective, its easy to understand why so many people do opt into exploring small loan options. That said small loans tend to also have shorter terms than long term loans, meaning that you may only have a total of three to four years or less to pay off the loan, but again with APR rates generally on the higher side you may consider paying off the loan sooner anyways.

Advantages of Personal Loans

Personal loans do however come with a host of advantages, like fast application/approval time. Personal loans are widely accessible and can easily be attained in a simple process online with expediated approval rates being 24 hours not unlikely. Personal loans attained only generally have a much less cumbersome process for approval than banks that have to follow more intensive guidelines, making them virtually paperwork free and efficient for someone that needs money right away.

Bottom Line

There are optimal times to pursue a small personal loan for $2000 and financer.com can help! Situations where consolidating debt, paying off credit cards, finance home remodeling, paying for a wedding, money for moving expenses, financing funerals expenses, buying a car, or paying a medical bill may all be the best time to evaluate whether or not it’s appropriate for you to get a small loan.

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