Tips For Getting Small Loans Approved
Small loans can help you fund huge events such as wedding, birthday parties or a dream vacation. You can also use it to meet basic expenses, such as groceries, utility bills payments and so on. In fact it is one of the most practical ways to get money without putting up any collateral. That means your car; house or pricey equipment will be safe from being repossessed if you default. When used correctly, small loans can help you save more money than credit cards and pawnshops. But, watch out for unscrupulous lenders who charge hefty interests and fees.
Below are tips that will improve your chances of getting approved for small loans with better terms.
Determine your borrowing needs
One of the biggest challenges of borrowers in choosing a loan is making sure they have access to the right loan product. To do this, it is important to consider the amount you need, and your current financial situation.
Even individuals with established income may also need finance for daily expenses and emergency needs. To ensure you are getting the right loan, it is essential to estimate your financial needs and to assess your ability to repay the borrowed money.
Here are some factors to evaluate before you apply for a loan:
- Financial Needs. What do you need to the money for? Generally speaking, those who opt for a small loan need the money for two reasons: emergency expense and additional working capital. Employed individuals usually wait for several weeks before they receive their salary. So, when a need arises they opt for quick cash loans, especially when they don’t want to touch their credit card anymore. Others have already exhausted their credit card limit if don’t have credit cards at all.
If you are one of those borrowers who want to apply for a quick loan to start-up and run your business, take time to calculate your anticipated expenses. These may include license fees, inventory and many others.
- Assess your current financial position. Where do you stand financially? If you are in a weak financial position, you may borrow a huge sum of money to cover all your urgent expenses. But, at the same time, it is important to assess your capacity to pay. If you are not expecting to receive a huge amount of money to repay the small loan, how can you possibly pay it back within the loan period? In such case, you may opt for longer term loan to give you more time to recover financially. Another good option is to use some of the small loan proceeds to augment your income.
- Determine the stage in your life. Are you in a transitional stage? People greater amount of finance when they are in between jobs, recently went through a divorce or they are still recovering rom a huge financial blow. If you are operating a startup business or one that is about to fall apart, lenders may consider you as a high risk borrower and may provide you with limited funding options.
- Urgency of financing. Do you need to apply for a quick loan because you are under pressure? Don’t make the mistake of applying for a loan chaotically because you are in financial trouble. A wiser option would be doing some research on available financing options and reputable lenders in your area. This helps you secure affordable loans with easy repayment conditions.
Go over your credit file
Request for free copies of your credit report from major credit reporting companies in the country. It will help you understand why you are in a difficult financial position. Check errors in the report that may have lowered you score and inform the reporting agencies and your creditors about it.
Knowing your score also gives you the opportunity to avoid applying for loans that you don’t qualify for. Remember that simply “trying your luck” by sending multiple loan applications can lower you credit score. When your application is rejected by multiple lenders, the loan officers would be cautious when looking at your loan application. With your credit file on hand, you can make enquiries on lending institutions that would most likely accept loan applications from borrowers with the same credit rating range.
Those with credit scores below 700 are usually returned down by major banks. If your credit score is below 700, you can either insist on applying at the risk of getting approved for higher interest rates or you can explore your options to the lenders specialising in high-risk borrowers.
Choose your lenders wisely
You can shop for small loans online. It helps you save time and money in applying, and you may also benefit from lower rates. But, remember that there are many advance fee loan scams out there. So, make sure that you only deal with licensed financial institution with excellent records.