Small Personal Loans: Learn Everything About It

Want to apply for a small personal loan? Learn everything about personal loans, their benefits, drawbacks, and the step-by-step application process here.

ByJaivinder Bhandari15 Jan 2024

New Update

Introduction

People depend on money to fulfill their financial needs and dreams. Money is one of the most important aspect because it helps in various situations such as medical emergencies, urgency, debt consolidation, or an opportunity you can't miss. Having access to quick funds can make all the difference. Small personal loans have emerged as a viable solution to these unexpected situations. In this post, we'll learn everything about small personal loans, their benefits, application process, considerations, and how to make the most of them while safeguarding your financial well-being.

Understanding Small Personal Loans

Small personal loans, as the name suggests, are small instant loans for a shorter period of time offered by financial institutions such as banks, credit unions, and online lenders. Unlike secured loans that require collateral, these loans are granted based on your creditworthiness and capacity to repay. Typically ranging from a few hundred to a few thousand dollars, small loans online are designed to address short-term financial needs without requiring you to pledge assets.

The Benefits of Small Personal Loans

1. Quick Access to Funds: When facing an unexpected expense, time is of the essence. Small personal loans are known for their instant funds in urgent situations; nowadays, many private lenders, such as lendingplate provide instant funds within an hour to a day.

2. Unsecured Nature: Most of the small personal loans are unsecured, which means you won't need to put any of your assets, such as your home or car, on the line as collateral. This can provide peace of mind, as there's no risk of losing these valuable possessions.

3. Flexible Use: Small personal loans offer remarkable flexibility in how you utilize the borrowed funds. Whether it's consolidating high-interest debt, handling medical bills, making home repairs, or covering education costs, the choice is yours.

4. Predictable Repayments: Many small personal loans come with fixed interest rates and predetermined monthly payments. This allows you to create a repayment plan that fits your budget without worrying about fluctuating rates.

Features of Small Personal Loans

A small amount personal loan online starting from ₹10,000 help manage urgent personal needs like medical bills or home repairs
Speedy approval lets borrowers receive funds within 30 minutes
No security is needed – so it is easier for those without assets to apply for loans
Repayment options are flexible, so you can select a time frame that fits their income & monthly expenses.
Online application is simple –only basic paperwork is required

The Benefits of Small Personal Loans

Eligibility Criteria for Small Personal Loans

How to qualify for a small personal loan? Getting a small instant personal loan depends on meeting basic conditions. These help lenders judge if the borrower can repay on time.

Age must be at least 21 at the time of application.
A steady income of ₹20,000 or more per month is needed.
Applicant should have worked at their current job for at least a few months.
A good credit score improves the chances of getting a loan quickly and at a better personal loan interest rate.

Documents Required for Small Personal Loans

Applying for an instant small personal loan needs a few clear documents. These help confirm who the person is, where they live, and how they earn.

Aadhaar card or PAN card for ID proof
Utility bills or rent agreement for address proof
Salary slips and bank account statements from the last 3 months
Job offer letter or company ID card as proof of employment
Bank records that show regular salary deposits and spending habits

How to Apply for Small Personal Loan Online?

Check Your Credit Score: Lenders will assess your creditworthiness by looking at your credit score and history. Lenders decide loan approval on the basis of your credit score. A higher score typically results in better interest rates and quick approval. Obtain a copy of your credit report and review it for any discrepancies.
Research Lenders: Choosing a lender for a small personal loan can be a critical task. It is important to choose a lender for a personal loan who is transparent in their terms and conditions. Don't settle for the first lender you come across. Research different options, including traditional banks, credit unions, and online lenders. Compare their terms, interest rates, and customer reviews to find the one that best suits your needs. Read the terms and conditions very carefully before applying for a small personal loan.
Gather Necessary Documentation: Lenders will require certain documents, such as for
1. ID Proof: Aadhaar, PAN
2. Address: Aadhaar, Utility Bill, Bank/ Credit Card/ Home Loan Statement, Rent Agreement
3. Proof of Income: Bank Statement, Employer ID, Payslip, Work Email. Have these documents ready to expedite the application process.
Submit Your Application: To apply for a small personal loan, you’ll have to visit the lender’s website or download their personal loan app. Verify your mobile number with an OTP. Complete the loan application accurately and truthfully. Double-check all information before submitting to avoid delays or disapproval.
Wait for Approval: The approval process can vary based on the lender and your creditworthiness. Some lenders offer instant decisions, while others may take a few business days to review your application.
Review the Terms: Once approved, carefully review the loan agreement. Understand the interest rate, fees, repayment schedule, and any other terms. Seek clarification from the lender if anything is unclear. Always choose a reliable lenderwho has transparent terms and conditions Otherwise, you may get trapped in a debt trap.
Accept the Loan: If you're comfortable with the terms, accept the loan offer. Funds will be disbursed to your bank account within a few hours or a day, depending on the lender. lendingplate has an instant disbursement process after getting loan approval. It provides the loan amount on the same day.

How to Apply for a Small Loan Offline for Salaried Employees?

Many salaried employees prefer the offline application process for small personal loan instant approval. Some people feel more confident applying in person. The offline process gives personal help from the lender's staff.

Step 1: Prepare the required documents -

Aadhaar card or driving licence for identity check
Recent utility bill or passport for address check
Salary slips from the last 3 months and Form 16
Bank statements showing salary credits over a few months
Job offer letter or ID card from your company

Step 2:Want to proceed with small personal loan apply online? The loan form must be completed with correct personal, work, and bank details. Mistakes can delay approval.

Step 3:The lender will review the details after submission. The lender will also check your credit & income before confirming the loan. The money is sent straight to your bank account once approved.

Considerations Before Borrowing

There are a few important things to consider before borrowing an online personal loan. Only move forward if everything is perfect and you can easily afford interest rates, tenure, and charges for the loan that you applied for.

1. Interest Rates and Fees: Interest rate is the first thing that a borrower should keep in mind because it determines their eligibility to repay the loan. Pay close attention to the interest rate offered and any associated fees. Calculate the total cost of the loan over its term to ensure it's affordable within your budget.

2. Repayment Schedule: Understand the repayment schedule and frequency. Ensure that the monthly payments fit comfortably into your financial plan. Choose a specific amount that you can afford every month.

3. Loan Term: Consider the length of the loan term. A shorter term might mean higher monthly payments but lower overall interest costs, while a longer term might have lower monthly payments but higher total interest. Choose the loan tenure very carefully.

4. Impact on Credit: Successfully repaying a small personal loan can positively impact your credit score. A positive impact will improve your credit score, and you’ll get instant loan approval in the future. Conversely, missing payments or defaulting can harm your credit, and your loan application may get reject in the future due to a low credit score.

5. Alternatives: Before taking out a loan, explore alternatives such as negotiating payment plans with creditors, borrowing from friends or family, or tapping into emergency funds.

Also Read About: Personal Loan Tenure – Maximum And Minimum Duration

Making the Most of a Small Personal Loan

1. Budget Wisely: Have a clear plan for how you'll use the loan funds. Whether it's addressing a specific expense or consolidating debt, stick to your plan to avoid unnecessary spending.

2. Emergency Fund: If possible, consider building an emergency fund to handle unforeseen expenses. This can reduce your reliance on loans and provide greater financial security.

3. Repay Promptly: Make consistent and on-time payments to maintain a positive credit history. Timely repayment not only preserves your credit score but also builds trust with lenders, and you may apply for a higher amount with the lowest interest rate in the future.

4. Avoid Over-Borrowing: While it's tempting to borrow more than you need, remember that you'll need to repay the loan with interest. Borrow only what's necessary to avoid unnecessary financial strain.

Conclusion

Small personal loans can serve as a financial lifeline when unexpected situations arise. They offer quick access to funds, flexibility, and predictable repayment terms. However, responsible borrowing is paramount to ensuring your financial well-being. Thoroughly research lenders, understand the terms, assess your ability to repay, and have a clear plan for utilizing the borrowed funds. With careful consideration and a proactive approach, small personal loans can help you navigate financial challenges while keeping your financial health intact.

Frequently Asked Questions (FAQs)

Q.1. What are the interest rates for small personal loans?

Interest rates usually range from 12% to 36% per year. If your credit score is good, you are more likely to get a lower rate. Lenders of small personal loans online India consider such applicants less risky. Some providers offer rates starting from 12% for those with strong credit and steady salaries.

Q.2. Can small personal loans help credit?

Small personal loans may build your credit history when you repay it on time. Regular monthly payments improve your credit report. Consistent repayment over the loan term can increase your creditworthiness for better terms.

Q.3. Do small personal loans affect your credit score?

Small personal loans might impact your credit score. You may build a strong payment history if you make your payments on time. Missing payments or defaulting can damages the credit rating. The impact depends on your repayment discipline as well as financial management.

Q.4. Can I get small personal loans with a low salary?

You may get small personal loans with a low salary if you meet the requirements. lendingplate requires ₹20,000 monthly income. Lenders also look at your debts, your job type, and your credit history.If your income is low, the loan amount might be smaller, or the interest might be higher. This is because the lender takes on more risk. So, the final offer depends on your full profile.

Q.5. Do I have to put up any security for small personal loans?

Small personal loans are unsecured. That means you don't need to pledge anything (not your gold, house, or savings). Lenders trust the ability to repay depending on your income as well as your credit score. There are no assets to recover in case of non-payment. So, lenders cover the risk by adjusting the rate.

Q.6. How long does it take to get a small personal loan approved?

Small personal loan approval time varies. If everything is in order, the money can be credited to your bank account within 30 minutes. But if you apply at a traditional bank, the process can take longer. It may take 2 to 7 working days for them to check documents. They approve the loan after checking the documents and transfer the money accordingly.

Q.7. What is considered a Small Personal Loan?

A small personal loan ranges from ₹10,000 to ₹2,50,000. These small amount personal loan are made for short-term needs like medical treatment, urgent travel, house repairs, or family functions. The final amount depends on your salary, your credit score, and how long you've been working. You can use the personal loan EMI calculator to understand the amount.

Author

Jaivinder Bhandari