Types of Loans and the Top 7 Benefits of Small Loans

With all types of temptations to monthly expenses and bills that need to be paid, it’s not surprising anymore to hear the term “loan”. As the list of our necessities continues to grow, more and more people are becoming reliant on loans to get out of their current situation. However, it is also important that you know how to differentiate your necessities from your wants.

By knowing this, you’ll be able to develop into a more responsible person. Moreover, it is important that you know the benefits of a small loan can vary depending on their characteristics and usefulness to meet your demand.

Here are the types of loans that you should know:

  •    Personal loans

These loans are what most banks offer to pay expenses virtually considering that there are personal loans pros and cons.

  • Credit cards

This is one of the most convenient loans that are used by companies and individuals as this form of payment is accepted by many merchants anywhere. These loans can be paid later in half or in full.

  • Home-equity loans

These loans are obtained by homeowners through borrowing money against the equity or value of their house.

  • Home-equity line of credit

This is quite similar to the home-equity loan except the fact that this credit line revolves. In other words, you can borrow a lump sum and repay a portion of it then get a chance to borrow again.

  • Cash advances

These are short-term loans that credit companies commonly offer without too much hassle.

  • Small business loans

These are the loans given by banks to small businesses and entrepreneurs upon submitting their formal business plan and receiving approval.

Want to Know More about Personal Loans or Small Loans?

Personal loans are also referred as “small loans”. This is because personal loans are the easiest loans to obtain by consumers because of its small amount. Based on your credit profile, your capacity to get small loans can be determined. In fact, your chance to qualify for personal or small loans is very high if you have a good income and credit history. Most importantly, lenders don’t care where or how you would use your small loans if you pay them on time.

Personal or small loans can be divided into two types namely: secure and unsecured. Secured loans are provided by lenders given that you have an asset or collateral to present like your car or house. Lenders provide unsecured loans without requiring collateral. However, lenders have the right to put high rates of interest. Both secured and unsecured loans are given in a set period and paid in a fixed monthly schedule.

Benefits of Small Loans

Should you go for obtaining small loans, you can enjoy a lot of benefits and convenience especially if you are in a hurry to get some money without passing through the eye of the needle. If you want to obtain loans without listing your reasons, personal or small loans can be your best partner in life. In as short as 24 hours, your request can be approved and receive your money within a few days or as early as tomorrow.

To get the details of the benefits from obtaining small loans or personal loans, read on.

  1. Flexibility

Unlike a home, student and car loan, personal loans can be used in many ways. From medical or travel expenses to improving or repairing your house, and paying your car repair costs, you can easily pay it with your loan especially those vendors that don’t want to accept credit cards as a form of payment.

  1. Competitive interest rates

Personal loans are way cheaper compared to small installment loans with no credit check. And depending on your credit history and relationship with your lender, you can get a better deal and discount on your interest rates. You may choose between fixed and variable rates but what’s more important is that your interest rate should never give you an overwhelming payment that is higher than what you can afford.

  1. Better credit profile

The credit utilization accounts for the 30% of consumers’ credit score. So, if you already maxed out your remaining credit on an unexpected expense, getting a personal loan would be a great idea. Once your request has been approved, your small loan would add to your existing credit to pay off your credit card balance.

  1. End variable interest rates and revolving balances

Compared with credit cards, personal loans offer fixed interest rates that are subjected to pay every month. Instead of increasing your loan until your credit line gets maxed out just like with credit cards, this loan lets you get out of your debt as soon as possible to prevent you from owing more than you can afford.

  1. Low minimums

If you badly need to consolidate another debt as soon as possible, small loans would be a big help because it requires a lower monthly payment compared with other loans.

  1. Diverse credit profile

If you already have credit cards, getting personal loans can diversify your credit profile and boost your credit score.

  1. Faster and less required security

Unlike car loans and mortgages, applying for this loan won’t require you so much documentation. You don’t need a collateral or security unless you apply for secured personal loans. Thus, the processing is faster.

Even though the small loan advantage can be tempting, take note that applying for any loan requires enough time to think about. You have to make sure that you are drafting the right financial decision that directs you to your planned future goals. No matter how small or big your loans are, always ensure that your loans will leave you with affordable payments and good credit history.

 

Be content and never take more than what you need to avoid a bunch of unpaid debts in the future. Take note, personal loans can be a good option only for paying off a few expenses and debts so pay your loans in full and on-time to earn good credits for the future.