A small expense can be a massive financial burden if you don’t have access to the right amount at the right time. If you need quick access to small amounts of money to consolidate credit card debt, finance travel plans, or to enroll your child to a prestigious college, small personal loans can be your go-to.
Since it is unsecured in nature, you don’t have to worry about placing your house or assets as collateral. So what exactly are small personal loans and where and how can you get one? This quick guide will discuss everything you need to know about small personal loans and how to acquire them with ease.
What Are Small Personal Loans?
Small loans are a type of unsecured personal loans. They are incredibly useful for individuals requiring small funds urgently. You don’t have to present any collateral or guarantor to avail this kind of loan.
You can apply for small loans online, and their approval process is less intricate and quick. If found eligible, the loan amount will be disbursed in 7 days or earlier. To increase the chances of loan approval, you can also add a co-applicant while applying. However, make sure the co-applicant has a reliable credit score, or else, it will negatively impact your loan eligibility.
Types of Small Loans
- Payday Loans
It is a type of small loan that is generally borrowed for a duration of 60 days. You can use it to meet the daily expenses, and it must be repaid in a single instalment along with interest. The maximum loan amount you can borrow as a payday loan depends on your monthly income.
- Small Personal Loans
Small personal loans are borrowed for a duration ranging from 60 days to 60 months. Unlike payday loans, you have an extended repayment period with small loans. You can use the amount availed for debt consolidation, education, home renovation, business expenses and more.
The interest rates of small loans are generally lower than that of payday loans. Rightly repaying small personal loans will help in improving your credit score and ultimately boost your credibility in the eyes of financial institutions.
- Line of Credit Loans
A line of credit loan is a type of flexible loan similar to credit cards. They are offered by a financial institution and consists of a pre-determined amount of money. You can access and use it as needed and repay them by a single instalment or over time.
For this type of loan, the interest rates are charged as soon as the amount is borrowed. Even if you have a particular credit limit approved, you don’t have to pay the interest of the whole.
How Can You Use Small Personal Loans?
There are no particular constraints on how you can use a small loan. In general, you can use it for,
- Unexpected bills
- Home expenses
- Medical expenses
- College expenses
- Debt consolidation
- Family vacation
- Marriage-related expenses
Critical Things to Know About Small Personal Loans
- They are generally unsecured forms of loan. This means you must have a sounding credit score to be eligible.
2. Small personal loan interest rates are usually fixed. This means you wouldn’t have to worry about market fluctuations.
3. The tenure of loan repayment will vary between 12 to 60 months.
Eligibility Criteria for Small Personal Loan
- Should be at least 23 years or utmost 55 years of age.
- Should be an Indian citizen.
- Should be working for a private or Public Sector Company or an MNC.
- Must have a CIBIL score of 750 or above.
If you meet the criteria, you’ll have to provide documentary evidence such as the following.
- KYC documents
- Salary slip of the previous two months
- Past three months’ bank statement of the salary account
- Employee ID card
As a part of checking your eligibility, the financial institutions will also look into your loan repayment history to determine the risks associated with you. They will also look at your debt-to-income ratio to assess whether you’re capable of repayment.
When deciding the amount of loan, always ensure you inspect your current financial status. Look at your liabilities, monthly payments, and income. Make sure you will have sufficient funds for repayment. If you default on loans, your credit score will suffer, and it will be increasingly difficult to avail a loan in the future.
In most cases, you need to earn around Rs. 25,000 per month to avail a personal loan. But again, the eligibility amount depends on your state and city of residence. Financial institutions will also look at your employment history to determine your income stability. If you have the habit of shifting multiple jobs in a year, lenders will view you as a risky candidate.
All in all, small personal loans can be life-savers when you require quick access to small funds. Visit Fullerton India to avail small personal loans with fast approval and minimal documentation.