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What Is a Small Loan and Which One Should You Get?

To some people, being financially prepared is near impossible. Unfortunately, life will always bring surprises. There will be emergencies that would require one to take out money that they do not have. Luckily, that is where small loans come in. If this is your first time encountering small loans and you would like to understand if it is a good option, this article is for you.


What Are Small Loans?


Small loans are short-term loans with a small capital from qualified lenders. The loan is typically between 50 and 5,000, while the term is seven to 31 days. The loan can be used for various purposes, such as short and urgent expenses, debt consolidation, cash flow management, and so on.


Small loans come in many forms and names, such as payday loans, installment loans, cash advance loans, check advance loans, post-dated checks, and other names. They are obtainable at almost all banks and financial institutions.


How to Know What Type of Small Loan to Get


Here are some considerations to help you determine what kind of small loan to get.


Borrowing Fees: When you request a loan, the lender may charge an application fee to cover your application costs, but not all lenders charge this fee. The lender may also charge a sliding-scale origination fee taken out of your total loan amount. This fee is not predictable, so you'll want to consider it when you make your request.


Loan Limits: Some lenders may be unable to issue a loan as small as the one you're seeking. If you cannot find a lender willing to provide the amount you request, you may need to consider other sources.


Annual Percentage Rates: APR measures the cost of credit, expressed as a percentage of the amount borrowed. It includes the interest rate, fees, and other charges associated with the loan.


Secured and Unsecured Options: Some lenders offer both secured and unsecured small loans. A secured loan is backed by collateral and has a lower interest rate than a non-secured loan. If you do not have collateral, you may qualify for an unsecured small loan, which is more expensive because there is more risk involved.


Repayment Terms: If you're concerned about the length of your loan, you should inquire about repayment terms before you apply. Payday loans typically include repayment terms of either two weeks or a month, although other loan types may consist of repayment terms of a week or even a couple of days.


How to Apply for a Small Loan


The loan application process usually takes two steps:


Apply online or in-person at a lender's office. You need to provide your contact information, employment information, and bank account information to the lender. The lender may also ask for the amount you wish to borrow, the details of your expenses, and your budget. The lender will give you an estimate of the loan fees you'll have to pay.


After submitting all the needed information, the lender will do a credit check and ensure there are sufficient funds in your account to cover the loan. If there isn't, the lender will either ask you to send a deposit or choose a different loan amount.


If the application is approved, the lender will forward the information to a direct deposit lender, and you'll receive the funds within 10 minutes. If you accept the funds by check, the check will arrive within 3-5 business days.


Conclusion


Don't panic when you encounter an emergency. Instead of running to the bank, make use of a small loan to get yourself out of trouble. It is a good and easy way to get through any financial crisis. Understanding the small loans, including the benefits and drawbacks, can help you choose the best loan to meet your needs.


If you are looking at getting small loans in Birmingham, AL, we can help you. At First Finance, we understand the time-sensitive need for help when short on funds. We strive to make same-day installment loans with clear, straightforward repayment plans. Start your application online or call us at 205-583-6185.




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