Small Personal Loans Online
Small personal loans have the reputation of being a lifesaver to many people all across the globe. And it is with good reason. These types of loans are easy to access, and they can be used for any purpose.
According to the Chamber of Commerce, up to 19.1 million Americans have some type of personal loans attached to their names. This figure is expected to increase even more in subsequent years. In 2019 alone, the numbers increased by 19.2%. The main reason behind this trend is attributed to the accessibility of small personal loans online.
In this post, we discuss everything there is to know about personal loans as well as their requirements.
What is a personal loan?
An unsecured loan that is loaned to individuals for their personal needs is called a personal loan. A personal loan is not earmarked, like other loans such as a mortgage, which means you can use it for covering wedding expenditures, house renovations, a medical emergency, and many more.
Personal loans are categorized as unsecured loans. It is because; you are not required to put down collateral in the form of property or other assets. Personal loans are given out by banks as well as other non-banking financial institutions, both online and offline.
Some of the conditions that define personal loans are your income level, credit history, and your employment history and repayment capacity. But the terms and conditions can vary from one institution to the other.
The amount of small personal loans can range from $1000 to $100,000. The loan amount, however, is subject to a number of factors which include:
- Limitations of the bank or the lender
- Your creditworthiness, i.e., good credit report
- Your requirements
The repayment term of a personal loan can be anywhere from two years to five. But it can even go up to seven years according to different lending institutions.
Requirements for small personal loans online.
The requirements for small personal loans online are pretty much the same as offline lenders. These are:
- A minimum income of $800 pre-tax every month. However, lenders favor those who earn up to $2000 pre-tax.
- An active bank account for transactions
- Minimum age of 18. But you have more chances of loan approval if you are 21 and above.
- Proof of income, such as bank statements. This can differ from one lender to the other.
Is the same day deposit possible?
Yes. In most cases, a same-day deposit is a possibility. The majority of the lenders follow a next business day deposit.
It is important, however, to understand that although lending institutions can approve your loan application almost instantly, the settlement time is out of their control. Deposits are processed by the banks which have their own regulations regarding transactions.
Most of the transactions undergo a process called ACH or Automated Clearing House Network. It is essentially where the transactions are collected and processed in bulk at a later time set by the bank. This is a reason why you may not receive the money in your bank account, even if your loan application is approved and guaranteed.
Another factor that affects the settlement and the cut-off time is the banks’ policy. For instance, transfers processed through the Bank of America to a client having an account number in the same institution have a same-day credit facility. This may not be the same for those who do not have the account within the same bank.
There are certain types of transfers, such as Zelle Transfers, where you can receive the payment within a few minutes. The majority of the banks have integrated with this payment facility, so check with your bank.
Pros and cons of personal loans
Personal loans are a great option for when you may feel like your boat is sinking. But similar to all things in life, they do come with advantages and disadvantages.
We will discuss them in this section.
Pros of personal loans
Debt consolidation
If a have a number of smaller loans that are eating away your wallet, a personal loan can save you. Some types of payments, such as credit card bills and payday loans, have exorbitant interest rates, which can sink you deeper into the debt cycle.
Since the loan amount, as well as interest rates of a personal loan, is more forgiving, it can help you pay off the smaller loans and focus on just one, i.e., personal loan.
Fixed monthly payments
The interest rates in most personal loans in fixed. This means that the amount of money you pay every month stays the same. It gives you a better grasp of your financial situation so you can clear your debt a lot quicker.
Extended repayment time
Since most personal loans have a term of two to seven years, this gives you a reasonable time to repay the loan. This cannot be said for extremely pressing loans, such as a payday loan.
Faster loan approval
Financial institutions waste no time in approving personal loans as soon as it reaches their desk. They can get approved a lot quicker than, say, a mortgage or a car loan. The option to apply for a personal loan online has also added to its expedited feature.
Accessibility
Along with traditional banks, an increasing number of institutions also offer personal loans. This has made them very accessible in a lot of ways. A bonus is that they are available both online and offline.
Cons of personal loans.
Hidden fees
The interest rates on personal loans may be reasonable. But there are a number of hidden fees that can push up that number. It commonly comes in the form of origination fees and APR.
To learn more, visit experian.com, one of the credit bureaus in the US.
Early repayment penalty
Another distinct disadvantage of a personal loan is that you can get penalized for repaying it before its due date.
Summary
Despite the few drawbacks, personal loans are a great way to establish a decent amount of stability in your financial life. The bottom line is to be a responsible borrower, or else you risk repeating the debt cycle repeatedly.
