Best 5 Small Loans Providers in 2020

Sometimes, you just need a little bit of extra cash. Whether it’s to help pay the bills, fund a home improvement project, or cover unforeseen expenditures on short notice; a small loan can help.

With a small loan, you can borrow only the money you actually need rather than pay for an enormous debt. Most small loans don’t require collateral, and you can get money in as little as one business day.

In this article, we’ll talk more about what small loans are, how they work, and why you might consider one. We’ll also highlight five of the best small loan providers on the market right now. By the end, you’ll have everything you need in order to make an informed decision about whether a small loan is right for you and which lender to use.

Summary of the Best Small Loans Providers

Understanding Small Loans

A small loan is a good way to put extra cash in your bank account to cover minor expenses. What constitutes a “small” loan varies from person to person and lender to lender. But in general, loans under $5,000 are considered small.

What Can You Use a Small Loan For?

In most cases, you can use a small loan to pay for anything you want.

Small loans are frequently used to pay for necessary expenses between paychecks. For example, you can borrow money to pay your bills on time or to cover the cost of food. Alternatively, you can use a small loan to pay for an unexpected expenditure, such as a medical bill or an emergency.

That said, you can also borrow money for non-essential expenses. Cash from a small loan can be used to make improvements to your home, to purchase a new appliance, or for anything else you have in mind.

Types of Small Loans

There are many different types of small loans out there, each with their own advantages and disadvantages. Understanding the options you have to get an extra infusion of money into your bank account is important.

Payday loans are the most common and well-known type of small loan. These loans are typically used when you want to borrow less than $1,000 for a period of a few months or less—just enough money and time to carry you through to your next paycheck.

The convenience of payday loans is offset by the fact that they can be very expensive. Many lenders charge interest rates well over 100%.

The second most common type of small loan is a personal loan. Like payday loans, these don’t require collateral. But, in contrast to payday loans, the amount you borrow is often more than $1,000 and the repayment period may be several years. The advantage, however, is that interest rates are much lower and there’s often no penalty if you repay your loan ahead of schedule.

Finally, there are several secured loan options that you can use to get extra cash in your bank account. Title loans require you to collateralize your loan with your car and if you fail to make payments, your lender can repossess your car. Pawnshop loans require you to secure your loan with other valuables, like appliances or jewellery. Both of these types of small loans are generally less favorable than unsecured payday or personal loans.

Affording a Small Loan

When looking for a small loan, it’s important to keep in mind that borrowing cash can be expensive. After fees and interest, you could end up paying back significantly more money than you initially borrowed. Before you take out a small loan, especially for non-essential expenses, it’s essential to figure out how much you can safely borrow. 

Financial experts recommend that your monthly payments are no more than 5% of your monthly income. In addition, these payments should be fixed so that you’re not struggling to make multiple payments piled up on one another. Ideally, the length of your loan repayment plan should be between three and 12 months.

Best Small Loan Providers in 2020

Conclusion

Borrowing a small amount of money can be a great way to pay your bills and meet daily expenses in between paychecks. There is a wide range of lenders offering both payday and personal loans with different loan terms, interest rates, and minimum loan amounts. So, it’s important to determine exactly what you need before applying.

With our review of the five best small loan providers on the market today, you can make a more informed decision about whether a small loan is right for you. If a little bit of extra cash can help you meet expenses, apply today.

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