Loans typically aren’t a topic that comes up super often in polite conversation, right?  And, on the off chance that they do, your first thought probably doesn’t jump to the different categories of them based on their size.  By size, we’re referring to the amount of money that is being borrowed or lent out.

Again, though, it’s not really the first thing that comes to mind when thinking about loans and debt.  However, there is a lot of information to chew on when it comes to this stuff, so it’s worth learning more about.  The hardest thing is keeping track of all the different types of loans since there really are just a ton of them out there.

To get a head start on that before we continue here today, you might want to check out this article: https://www.forbes.com/advisor/business-loans/types-of-business-loans/.  While we won’t be focusing much on business loans, they can be useful for a ton of people.  It’s also just not a bad idea to know the difference between consumer ones and business ones as you start to consider the types that you want to apply for.  It’s not always stated up front on the information pages, after all.Once you’ve got the basics down pat, though, this stuff really isn’t that difficult to get the hang of!

What are Small Loans?

To start off, we can tackle the titular style of loan, small ones.  Now, these aren’t to be confused with “micro” loans, which are in fact something different.  Typically, the amount of money that’s borrowed for these ranges between a thousand dollars to ten thousand dollars in United States currency, although it could be different depending on what currency you’ll be using.  That’s a decent baseline to be aware of, at the least.

The purpose of them varies, really.  Most of the time, though, they’re there for folks who are in a bit of a pinch financially speaking and can’t afford an upcoming expense comfortably.  Credit cards are an option, there, but they’ve usually got higher interest rates than something like a small loan, making them less popular there.

Honestly, the biggest reason that folks don’t gravitate toward them more often is that they’re not talked about a whole lot.  Unfortunately, despite how useful they can be, they just don’t get much publicity.  That’s why we’re here to change that, today, though –they’re a tool that more consumers should be aware of.

How They Work

The way that they work is really the main draw to them, especially when you compare them to credit cards.  Here’s the thing –no matter what sort of loan you go for (including credit cards), you’re going to have to pay fees and interest.  That’s how lenders make money when giving borrowers money, so it’s just something to deal with.

When we can reduce the interest rate that we’re paying though, for instance, that can be a pretty big deal.  No matter what way you look at it, you’re saving money that way.  So, one of the most interesting things about small loans is that most lenders offer fairly low interest rates one them.  There is a catch to that, though.

You see, a smålån tends to require a bit of a higher credit score than some of the other consumer loans that are out there.  Why is that, though?  Well, the lower interest rates mean that lenders are risking more when they give these sorts of loans, so they don’t hand them out willy-nilly.  Instead, they’re reserved for borrowers who have proven to be dependable and trustworthy.

This isn’t necessarily a bad thing, of course – it’s something to be aware of.  You may have a lower chance of being approved if your credit score is “fair” or lower.  However, that’s not a guarantee depending on what lender that you’re working with.  For example, some international options don’t put as much stress on credit scores in their applications.

What to Use Them For

Again, there are all sorts of options here.  They’re a type of personal or private loan, meaning that you have flexibility when it comes to how you want to spend it.  “Right” and “wrong” ways to use the funds don’t really exist, either, so don’t feel guilty or judged if you want to use a small loan for something that other folks would consider “frivolous.”

Examples of that might be wedding planning or vacations.  So long as you’re not borrowing out of your means, of course, and know that you’ll be able to make repayments on the debt, there’s really nothing wrong with getting a loan to cover expenditures for either of those things.  Say you’re trying to book a vacation home for the summer, but the down payment is just way too high – a small loan could help you cover that sort of thing.

If you’re responsible about it, you can use it for nearly anything.  Just be sure that you remember that critical point, though – be responsible.  Don’t borrow a bunch of money to go gambling, for example – that tends to end very poorly.  Plan out your bills and decide whether or not you can afford another expense comfortably.

Are They Worth it?

With all of this information covered, though, the main question becomes…are they really worth it?  Is the risk of ending up in debt that we can’t recover from worth it?  Realistically speaking, it’s not likely that a small loan is going to be a make it or break it sort of deal for finances.  The balances are low enough that they’re usually manageable, even when you factor in the interest rates.

Ultimately, this means that the decision will be up to you on whether or not it’s worth it.  To some borrowers, the obvious answer will be “yes.”  Their utility alone justifies them.  You can even use them to help build up your credit score – borrowing a thousand dollars or NOK and being able to pay it off in increments over time can give your score a boost.

Of course, that’s if you are making those payments on time – if not, it can have the opposite of that intended effect.  Be mindful of that sort of thing as you submit applications and choose what lender that you want to work with.  Make sure that borrowing and having an extra bill is realistic for you and your family right now before you commit.

Still, though, there are some situations that are out of our control that necessitate borrowing money somehow.  Medical emergencies are a big one – insurance won’t always cover everything, unfortunately.  While credit cards might be a faster option in some circumstances, if you do have a good credit score, it’s worth at least trying to get a small loan instead.

There are even some lenders that have same-day application and processing times for them.  The resources provided above offer a bit more info on that, for those wondering what that looks like.  Even if you aren’t able to find a same-day approval, though, depending on the emergency, usually it can afford to wait at least a few more days.

For the non-emergency expenses, though, deciding whether or not it’s worthwhile can be a lot more difficult.  Sure, most of us definitely want to be able to go on our dream vacation or plan out the most beautiful and extravagant wedding ever, and these small personal loans can certainly help us to achieve those goals.  There’s just the fact that, of course, we’ll end up making payments on that balance for a long time.

Really, though, if you know that it’s within your budget, there’s not really a reason not to go for it.  If you’re careful about what you’re spending on, and you are confident that you can pay the bills, then yeah – it’s worth it to get a small loan.

In terms of finding a lender…well, comparing things like the repayment period as well as interest rates is usually a good place to start.  Some websites allow you to compare between a bunch of different ones without you having to go to them directly, which can be nice in terms of saving yourself some time.

Obviously, though, no matter where you decide upon, you’ll have to submit an application.  It doesn’t hurt to apply to a few different ones, considering that getting accepted isn’t necessarily binding.  You can still choose between them after.