Here’s What You Should Know About Getting a Small Personal Loan

Various loan options are available when you need to borrow money. However, a small personal loan may be your best option if you need just a small amount of flexible funding to pay for incidentals or an emergency.

Small personal loans can be used for various purposes, such as medical bills, home upgrades, auto repairs, and debt consolidation. They are a quick and effective solution to getting money quickly when you don’t have the cash on hand. But even though the dollar amount might not be too high, it is still crucial to know all the essential information on personal loans so that you can make monthly payments on time and rebuild your credit.

Here’s what to know about personal loans to help you decide whether a short-term personal loan is the ideal solution for your needs right now.

Small Personal Loans vs. Larger Loans and Alternatives

Small personal loans, like the ones we offer at Tower Loan, are about $2,000 to $3,000 on average. This amount is considerably less than what you would receive with other types of loans, but it is a manageable amount you can pay off quickly and avoid getting further into debt.

A $2,000 loan or $3,000 loan could be beneficial to help you pay for unexpected expenses, such as a larger-than-usual bill that you don’t have enough cash to cover. A loan for $2,000 might be precisely what you need to consolidate other debts for a lower interest rate. A $3,000 loan might be enough to cover specific home renovations or fix your vehicle so you can drive to work.

Some small personal loans are as small as a few hundred dollars, while others are a few thousand dollars. The amount that you qualify for will depend upon your state, financial situation, credit history, and how much money you need.

Besides loans, there are alternatives available when you have small expenses to pay for. For example, you may choose to put money on a credit card if you can pay off the expense in full before the payment due date and avoid interest fees. However, credit cards typically have higher interest rates than small personal loans, which can be challenging if you cannot pay off the entire balance very quickly. Payday advance apps and “buy now, pay later” companies are other options to consider when you need access to money quickly, especially if a personal loan is not an option.

How Do Small Personal Loans Work?

A short-term personal loan is a pathway to achieving your immediate financial goals without putting an undue economic burden on your monthly budget. After you complete your application, we will request information about your identity, finances, and employment.

We can provide an immediate decision on your loan application from there, or you can visit your local branch to discuss your loan options. We give you the option of signing documents electronically to have the funds deposited directly into your bank account, or you can sign the documents in our office and receive a check with your loan funds.

What Are the Interest Rates and Fees?

Before taking out a personal loan, you must understand the terms, conditions, rates, and fees. The average personal loan interest rate can be anywhere between 6% and 35% or higher. You may have a higher APR if you have a low credit score under 580.

According to our rates and terms, Tower Loans offers 12- to 36-month loans up to $6,000 (or up to $20,000 with a branch visit depending on the state) for an annual percentage rate of 32.99%.

If you have a credit score of 670 or higher, you’ll have the best chance of getting approved for a personal loan. However, you shouldn’t let this fact discourage you from taking out a personal loan. We award loans to people with lower credit regularly and encourage borrowers to rebuild their credit by making their monthly loan payments on time.

Aside from interest rates, you’ll also want to verify if your lender charges origination, late payment, or prepayment penalty fees. Many personal loans have a repayment period of two to five years, but you may be able to secure shorter or longer terms, depending on your lender. Also, ask your lender if there are any usage restrictions on your small personal loan and what the funding timeline is so that you know how quickly you can access your money.

What Are the Different Types of Personal Loans?

Small personal loans are flexible funding sources that you can use for essentially any purpose. Online loans give you the opportunity to submit your application from the comfort of your home and get quick approval for the money you need.

Home improvement loans are helpful for kitchen remodeling, bathroom additions, insulation enhancements, flooring renewals, and window upgrades. Vacation loans can help you pay for plane tickets, hotel rooms, travel insurance, restaurant costs, or all-inclusive cruises. Other personal loans can be used to pay for funeral bills, costly electronics, and healthcare costs. Regardless of the loan’s purpose, personal loans are paid off in installments, offering predictability, convenience, and no risk of entrapment because of the clear payment structure and deadlines.

How Do Personal Loans Affect Credit Score

Some people wonder and contact us with the question, “Are personal loans bad for my credit score?” The answer is no, not necessarily, and in fact, a small personal loan may actually help you rebuild your credit over time.

Taking out a personal loan can provide additional positive payments, a lower credit utilization rate, and an increased credit mix. Many people take out personal loans to improve their credit score by proving they are responsible borrowers who can make payments in the correct amounts and on time.

But if you mismanage your loan and miss payments, small personal loans could be bad for your credit score. A poorly managed small personal loan could result in inquiry-related credit score drops and the burden of managing additional payments with increased overall debt.

When you apply for a small personal loan, a reputable lending company will conduct a hard credit inquiry that temporarily lowers your credit score by a few points. If you are approved, your credit score should bounce back as soon as you’ve made a few payments on time and hopefully continue increasing from there.

How Long Does It Take to Get a Personal Loan?

One of the most beneficial things about small personal loans is that you can get them quickly without an extensive application process or waiting period. At Tower Loan, we understand the many reasons why you might need fast cash and are here to expedite the process so you can get on a good financial track.

Unlike traditional banks, small loan lenders like Tower Loan are often able to process loan applications in just a few hours or even sooner to get you the money you need without delay. Once we complete the verification process, you can expect to see your loan money deposited into your bank account within 72 business hours.

Pros and Cons of a Small Personal Loan

Even with the smaller loan amount of a $2,000 loan or $3,000 loan, borrowing money is a serious financial obligation that requires careful consideration. Here are some pros and cons to think about as you research your lending options and compare interest rates, terms, and fine print.

Pros:

• Flexible funding
• One lump sum of money
• Lower interest rates than other lending sources
• Easy to manage
• Potential to improve your credit

Cons:

• Must meet eligibility requirements
• An additional monthly payment to make
• Increased debt load
• Interest rates can be higher than some alternatives

Where and How to Get a Personal Loan

You can get a small personal loan from a bank, credit union, or online lender. Working with a reputable lender, such as Tower Loan, is essential. Avoid predatory payday lenders that don’t run a credit check, require you to repay the loan in a few weeks, or have excessively high APRs.

As you are comparing lenders, look for one that specializes in small personal loans and caters to clients who need smaller amounts of money so that they provide the best rates and most flexible terms. Only take out a loan for the amount you truly need and consider paying the highest monthly payments you can afford based on your budget to pay off your loan as quickly as possible and accrue less interest.

Is a Personal Loan Right for You?

We hope you have found this information on personal loans helpful and now better understand whether a small personal loan is the right option for your current financial needs.

With branches throughout Alabama, Illinois, Louisiana, Mississippi, Missouri, and Texas, Tower Loan can help you find a small personal loan to suit your needs and get on a path to financial freedom and stability. It’s simple and straightforward to integrate a $2,000 loan or a $3,000 loan into your overall budget and make fixed monthly payments over a specified amount of time.

If you could use a financial boost and are ready to take out a short-term personal loan, please apply on our website today or visit your local branch.