Small
Loans

What is a Small Loan?

Small loans allow people to borrow money for a wide range of purposes, from emergencies to home improvements, unexpected bills to large one-off purchases. While they can be beneficial, they also come with potential risks and issues, so it’s essential to understand how they work, how to get one and, most importantly, the possible downsides. 

Small loans are personal loans that are taken out by individuals when they need a little extra money. There isn’t any legal definition of “small loan”; however, in general, lenders tend to refer to sums between £500 and £2,000 as small loans.

In virtually every case, a little loan will be unsecured. That means there’s no collateral (for example, a car or home) to be accepted by the lender. When compared with long-term loans, small loans often have a higher interest rate.

How Do Small Loans Work?

A small loan will work in a similar way to a large loan. Essentially, you choose a lender then make your application for the loan product. The provider will then examine various factors such as your credit rating and whether you’re within their unique lending criteria. 

Should they deem that you’re eligible, they will then offer you the loan at the interest rate that they think most appropriate before sending you the money directly to your bank account.

There is a difference between large and small loans in terms of APR (Annual Percentage Rate). The interest that needs to be repaid will almost always be higher for a little loan. That means, even though you’ll be borrowing a smaller amount of money overall, you will need to pay back a more significant proportion of the amount borrowed. 

You will pay the loan back monthly until you’ve cleared your balance. You will need to determine the length of the loan term you require before making the application. 

Most loan providers offer loans with repayment terms between 1 month and 5 years. Some lenders permit borrowers to repay their balance more rapidly to save money or allow them to spread the payments over a longer period. A loan that is repaid over a term of less than a year is typically called a short-term loan. Loans borrowed for a year, or more are known as personal loans or long-term loans.

What Can I Use a Small Loan For?

Small loans can be used for any purpose, but it’s important to note that in most cases, they should be viewed as a stop-gap measure only, and you should repay it as quickly as possible to clear your debt. 

Many people use small loans for unexpected expenses in an emergency, such as paying for a boiler repair in winter or car repairs after a breakdown. 

Before taking out a small loan, it’s essential to be aware that the interest rate will be higher, so it isn’t a good choice if you need to borrow on a long-term basis.

Types Of Small Loans 

There are several types of small loans including:

• Payday loans – these have very high interest rates and are very short-term loans offered via a business rather than a bank.

• Short term loans – these loans  must be repaid in under a year and usually have a higher interest rate. 

• Debt consolidation loans – these are loans that are taken out to pay off several existing debts. Usually, this makes it more affordable to repay the total amount since the repayment terms will be more favourable.

• Instalment loans – these loans are repaid over a period with a specified number of payments until it has been fully repaid.

• Same day loans – this is a rapid option. The applicant can make an application to receive the money they need directly into their bank account, with approval and processing taking place on the same day. 

• Fast cash loans – with these loans applicants can apply for funds and get approved within an hour.

How Do I Apply for A Small Loan with Creditspring?

Most small loans can be applied for within a few minutes online. However, there are always minimum requirements that must be met.  

• A borrower must be aged 18 or over to apply for a loan anywhere in the UK.

• A borrower must be resident in the UK.

• A borrower must be able to provide proof of their address. 

• A borrower must have a regular source of income.

• A borrower must accept that their credit report will be checked. 

• A borrower must be able to repay their loan.

Can I Get a Small Loan with Bad Credit?

Getting any loan with poor credit can prove challenging, but that doesn’t mean it’s impossible. You may be able to secure a small loan if your credit rating is poor, but often it will be from a lender specialising in bad credit loans. 

As a result, you’ll almost certainly be paying a higher interest rate and be offered a lower borrowing limit than somebody whose credit score is high. You may also be able to obtain a small loan if your credit history is poor by putting up your house or car as collateral. 

Alternatively, ask a friend or family member to be a guarantor for the loan (i.e. ask them to pay the loan back on your behalf if you default on your payments.) Be aware, though, that this could be a risky course of action and could cause major problems in your life if your guarantor suddenly becomes expected to pay your debts for you. Often, people agree to be a guarantor fully expecting you to make your payments on time. It’s likely they will be upset and angry if they find they end up being required to make payment after doing you this favour.

What Is the APR on a Small Loan?

Typically, the interest rates chargeable on small loans is presented as an Annual Percentage Rate (APR).

So, for example, if you need a loan of £1000 and will be paying it off over 12 months with an APR of 10%, the total amount you’ll pay back will be £1100.

Providers typically show their lowest possible APR to attract more borrowers; however, not every applicant will receive this rate – only those with a good credit score. You’ll be offered an APR dependent on your credit rating. If your credit rating is poor, you’ll find it more expensive to borrow as lenders see borrowers with a lower credit score as a greater risk.

Should I Get a Small Loan from Creditspring?

If you sometimes incur unexpected expenses (and who doesn’t), you may find that obtaining a small loan with a low interest rate is the ideal way of resolving your problem. 

However, if you’ve ever done any research into finding small loans of £500 over 12 months, you’ll have already spotted that these loans aren’t cheap. Often, banks don’t offer small loans, so borrowers need to go to other lenders who charge fees and high interest rates. 

A Creditspring membership can save you from these extra costs by giving you access on-demand to small loans without any interest to pay, available to you when you need them most. If you apply for a Creditspring membership, you can save yourself a lot of stress and money in the long run, so complete your details today and find out if you’re eligible!

Are Small Loans Accessible to People Who Are Unemployed?

If you’re unemployed, it’s harder to get credit since you need to prove you can repay a loan before being approved for one. Fortunately, though, if you’re receiving benefits, you can often borrow small amounts of money if you’re able to prove you have sufficient means to meet your monthly repayments.

If you’re unemployed you need to be sure you’re capable of repaying the money you’ve borrowed. If you miss your payments, your financial circumstances will become even worse. 

You’ll incur more debt, and your credit score will take a significant hit, making it even harder for you to secure credit when you need it in the future. 

Are There Any Alternatives to Small Loans?

Small loans have a high APR, and so are often disproportionately expensive. This means that some people look for alternatives.

Some of the options include: 

• 0% interest credit cards – if you’re sure that more money will be being paid into your account within a short space of time, a 0% interest rate credit card may be a better solution than a small loan. Make sure that the entire balance is paid off before the 0% interest period ends though, as the APR will almost always rise sharply after this point. Take time to read the small print before using this type of card instead of a small loan, and bear in mind that if your credit rating is poor, you may not be eligible to apply for this type of card. 

• An overdraft – An overdraft is a facility that occurs when there is not enough money in your account, but the bank/building society allows the transaction that you have made or instructed to go ahead. Overdrafts are essentially an extension of credit from your account provider until the account then reaches more than zero in your account. There are two type of overdraft the first is “Authorised” this is an overdraft that you have asked your bank for prior to using but they will still charge interest on the sum so please be aware of the rate. The second is a “Unauthorised overdraft” this happens when you spend more than you have in your account without agreeing with the bank in advance and are traditionally more expensive than an authorised one.

What Are the Advantages and Disadvantages of Taking Out a Small Loan?

Like any form of credit, there are advantages and disadvantages to taking out a small loan. These include: 

Pros: 

• You can access money quickly to cover an unexpected expense. 

• The funds will usually be paid directly into your bank account, ready for use. 

Cons:

• The interest rate will almost certainly be higher on a small loan than on a loan for a larger amount.

• There may be an early repayment penalty or fee to pay if you attempt to repay your borrowing earlier than the specified term.

FAQs

What Can Creditspring Offer?

A Creditspring membership gives you access to two small loans per year of up to £1200 each. This no-interest (Rep. APR 48.1%) borrowing can help you out with those unexpected expenses that pop up from time to time.

When something unexpected occurs that requires you to find a little extra cash in a hurry, it’s often tempting to seek out a payday loan or small loan. However, these options can be costly. Creditspring’s no-interest small loans can help resolve this problem without causing huge debt issues in the future.

How Quickly Will My Small Personal Loan Be Received?

The speed at which you’ll receive your loan will depend on your lender and the type of loan you apply for. It can take several days for some loans to be approved and processed, while others can be approved and processed within a single day. 

Fast cash loans are approved and processed within around an hour of the application being made. Usually, once your application for the loan has been approved, you’ll probably receive the funds instantly into your bank account. 

What Other Costs Do I Need to Consider?

When you’re considering applying for a small loan, the most important thing to remember is that you should never miss a repayment. If you default on a payment, you’ll usually receive a charge for late payment, and you could also trigger a penalty rate of interest, so your future repayments will be higher. 

Also, of course, a missed payment will harm your credit score, making it even more difficult to borrow money at a good APR in the future. 

The lender may also charge a fee for taking the loan, especially if you’re using a broker.