As nice as it would be to avoid the unexpected pitfalls that life throws in our way, no one is immune. At some point or another, you’ll likely run into a scenario where you need to take an unplanned trip to your mechanic, deal with some sort of household emergency repair, or take care of an expense that you hadn’t planned for. Whatever the case may be, if you haven’t financially prepared for the unexpected, even an emergency expense of a couple hundred dollars can throw your financial situation into disarray.
If you end up in a situation like this one, you might want to start exploring what your borrowing options could be – especially if your savings are low. But where do you start? Should you pay off your emergency expense with a line of credit or should you opt for an installment loan? Or maybe it simply makes sense to use your credit card?
The truth is, there are a lot of options out there that could potentially help you, and the only way you’re going to figure out what works for you is by doing some digging and researching which small personal loans might be best suited to your situation.
To help you get started on the right foot, we’re going to dive into some of the important things you need to know about small dollar loans, including when you should (and shouldn’t) consider applying for one, the different types of small personal loans out there, the benefits of small loans online, and more.
A small personal loan can refer to a broad spectrum of borrowing products that are specifically meant for personal use. You can apply for one through a bank, credit union, online lender, or certain other types of financial institutions. While the repayment process is going to vary between different types of personal loans, you’ll generally need to pay back the principal balance (the amount you’ve borrowed) plus interest and/or fees. The amount you can get approved for is also going to vary based on a few different factors, like your credit history, your income, the financial institution you’re applying for a small cash loan with, and more.
Technically, they can be used for whatever you’d like, but that doesn’t mean that you should feel free to use them frivolously. Ultimately, any personal loan is going to cost you money in the form of interest and/or fees, so you should only ever apply for a loan when there’s a serious need. But what constitutes a serious need? Let’s take a look.
Before you submit an application for a loan, it’s important to have an understanding of the types of situations where it might be appropriate to take on debt. When we talk about small personal loans in this case, we’re specifically referring to loans that can help you deal with an emergency situation.
But if you happen to be walking by a store window and see a beautiful leather jacket that you know would look good on you, why can’t you apply for a loan to help get you what you want? What’s the potential downside? Well, one of the main reasons you should limit your use of small short-term loans is that they’re often not cheap. Remember, you’ll be paying interest and/or fees on what you’ve borrowed, and this can start to add up over time. On top of the cost, if money is tight and you start to miss loan payments, you could do some serious damage to your credit history. This could limit your ability to find loans with favourable rates moving forward. So, for these reasons, you’ll want to avoid applying for a personal loan when you’re not facing an emergency situation, and you’ll want to make sure you’re able to recognize what an emergency is and what it isn’t.
The truth is, what an emergency situation looks like is going to vary from one person to the next, so your focus should be on following general rules of thumb and applying these as best as you can to your situation. For example, let’s imagine that you don’t have great public transportation options to get to work, it’s too far to bike or walk, and you don’t live near anyone that you work with. This means that your only option to get to work is to drive. If you happen to hit a pothole particularly hard and get a flat tire, you could be in for some serious trouble. If you don’t take care of the problem right away, you might be forced to miss shifts at work. And if you miss these shifts, you’ll have to deal with a lighter paycheck for the foreseeable future. You can probably say that this situation would constitute an emergency. This may not be the case for someone who could afford to miss time at work or has access to another mode of transportation.
Generally, an emergency situation is something that threatens your well-being, but if you’re looking for some slightly more specific situations that could be considered an emergency, you could include things like:
If you’ve assessed the situation you’re in and feel like it’s an emergency, should this give you the automatic green light to try to get a small loan? The simple answer is no. Before you submit an application, there are a few things you’ll need to figure out beforehand. First, you’ll need to take a look at your financial situation and figure out if you can afford to take on any debt. Next, you’ll need to formulate a plan to make all your payments. To do this, take a look at the websites of different financial institutions that offer or service the personal loans you’re considering applying for. They should have enough information on the products they service for you to make an informed decision.
There are also certain situations where you should nearly always avoid applying for small personal loans. This would be for things like:
If you feel like you can safely say that a personal loan can help you and it’s something you can afford, you’re going to want to make sure you’re applying for the right type of loan for your situation. Different loans have different characteristics, so it’s important for you to make sure you have an understanding of what your options may be. Let’s take a look at some common types of small cash loans.
Small installment loans can be a useful option if you want to spread out your loan payments over a relatively long period of time. If you get approved for one, the money you receive will be given to you in a lump sum. The exact number of payments will vary, but you’ll then need to pay back what you owe over a series of scheduled and equal installments. This could take a few months, or even a few years depending on the situation.
Payday loans are another type of personal loan that provide you with funds in a lump sum, if approved. The main difference is that instead of your repayment period being broken down into multiple payments spanning a relatively long period of time, you’ll need to repay what you owe by your next pay date. You should also keep in mind that they tend to be a fairly expensive form of credit. Because of their steep cost and the short repayment timeline, you shouldn’t use them lightly. In general, think of them as a last resort to help you handle an emergency expense, and never apply for one unless you’re sure you’re going to be able to repay it.
While lines of credit are still personal loans, they fall into a different category than small installment loans and payday loans. A line of credit is a type of revolving credit, which means that instead of getting approved for a lump sum, you’ll be given a specific credit limit, similar to a credit card. From there, as long as you have available credit and your account is in good standing, you can draw funds against your credit limit on a continuous basis. You can keep drawing funds as you pay down what you’ve borrowed. In terms of repayment, you’ll only need to pay interest and/or fees on what you’ve borrowed, not on the total amount of your line of credit limit.
Installment Loans and Lines of Credit are available through MoneyKey. We are a direct online lender in Delaware, Idaho, Kansas, Mississippi, Missouri, Tennessee, Utah and Wisconsin. In Texas, we arrange loans as a Credit Access Business and a Credit Services Organization.
MoneyKey also services Lines of Credit offered by CC Flow. CC Flow is a division of Capital Community Bank (CCBank), a Utah Chartered bank, located in Provo, Utah, Member FDIC.
MoneyKey will be your single point of contact for all questions and concerns with respect to loan products offered through the MoneyKey website.
Check out the Rates and Terms page to learn more about the loan product available in your state of residence.
As we mentioned above, there may be certain hurdles that come when you want to apply for a personal loan in person. But what are these hurdles, and how can an online loan help you to potentially avoid them? Let’s take a look at some of the benefits of an online direct deposit loan.
One of the nice things about small loans online is that if you need money in short order, they may be a way of getting what you need quickly. Why? The application process is generally quick relative to in-person loans. You can typically get through an application in just a few minutes, depending on the organization that you’re applying through.
On the other end of the spectrum, applying for a loan in person can sometimes present some hurdles that could hold things up. For starters, you’ll need to take into account the amount of time it’ll take for you to actually travel to a storefront. And once you get there, you’ll need to consider the wait time and whatever amount of time it takes to fill out an application. It’s especially important to have a speedy application process when you need to deal with an emergency expense right away.
Not only can they provide you with a fast application process, the experience of applying for a small loan online is also fairly convenient! Some of the common hurdles that you could come up against when applying for a loan in person are things like your location relative to the nearest lender, travel time, finding the time in your packed schedule to go to an in-person lender, and more. When you apply for small loans online, you can avoid most of these issues. All you need to do to apply is find a few minutes in your schedule to go online and submit an application. You can do this from wherever you get internet and is most convenient for you. With a lot of financial institutions, you can even apply 24/7.
Whenever you’re grappling with a major financial decision, one of the best things you can do to prepare yourself is to do as much research as possible. Your aim should be to be as informed as you can, otherwise you risk doing damage to your financial profile.
With small loans online, the research process is straightforward. If a financial institution keeps up with responsible lending practices, they should list the vital details of the loans they offer or service on their website. So, this means that you can go online, do a simple search for online loans offered to people who live in your state, and pull up different potential options. You can then compare the important details and decide which option is best for your situation.
If you’re at the point where you’ve assessed your current situation, decided that a quick small loan is right for you, and you’ve looked at your potential borrowing options, you might be ready to finally apply for a loan. But before you do, it helps to have an idea of what the requirements for qualification are. These won’t necessarily be the same from lender to lender, but there’ll more than likely be some common things that most organizations look at. This could include things like:
The simple truth is that emergencies can be scary. When money is tight and you have a large unexpected expense staring you in the face, it’s not always easy to keep your composure. If you find yourself in a situation like this, a small cash loan may be able to provide you with the short-term financial relief you need. Just remember to go about the process of looking for one carefully. Applying for a loan is a big decision, so you’re going to want to make sure that you make the right choice for your situation.