July 22, 2021 (Newswire.com) –
Large loans and small loans both serve the same purpose — they allow someone to stretch their spending power beyond their regular earnings and pay it back later.
Some general loan shopping advice applies to both types of loans, but small loans do have unique factors to consider.
Here are some things to weigh when looking for a small loan.
1. Credit Score and Income
Lenders issuing larger loans look at credit score and income, but they also tend to have collateral securing the debt. As such, credit score and income don’t play as significant a role.
On the other hand, small loans don’t often ask for collateral. Suddenly, credit score and income become vital to getting approved and landing great interest rates.
Borrowers should make sure their income is stable. Higher credit scores are better, but there are options for people with low credit scores as well.
Regular fees are another critical consideration on small loans since any fee will be a much larger percentage of the total loan amount.
In other words, a $50 fee on a $100,000 mortgage is insignificant compared to that same $50 fee on a $300 loan. That means in addition to comparing interest rates, comparing fees can be equally or even more important when it comes to getting the best value on a small term loan.
3. Speed of Funding
If someone’s looking for a small loan, there’s a solid chance they need the funds relatively soon.
When looking at lenders, borrowers should investigate how fast application approval and funding occurs.
Some loans — such as pawn shop loans — can be obtained in as little as an hour but can’t be obtained online. Many online loans now are even able to offer same-day direct deposit funding.
With Advance America, borrowers can receive money immediately in-store, and online loans approved before 10:30 a.m. EST will typically be funded same-day and any loans approved later are funded the following banking day.
4. Type of Lending Institution
Different types of lenders have different terms.
Major US banks don’t typically offer unsecured personal loans for less than $1,000. They also may come with processing fees. Borrowers can get a loan from almost any bank, as long as the borrower has sufficient income and credit, but taking out a loan for more money than necessary means paying interest on the full amount of the loan.
Credit unions generally offer loans as low as around $500, along with better rates, better terms, and lower fees. However, borrowers must be a member of the credit union. Also, credit union members can often use their deposits at the institution to accelerate the approval process.
Online lenders generally have a wide range of amounts available and fast funding but may charge higher interest rates. Borrowers can also use calculators and tools on the lender’s website to see what types of terms they might qualify for before applying.
Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.
Source: Advance America