August 1, 2023
Life is not kind. Sometimes your fate hardly showers you with money. You have no choice but to live hand to mouth. Since you are trying hard to make do with what comes in every month, it does not mean that you are immune to the unforeseen needs of money.
If you are lucky enough to have managed to build an emergency cushion, you may still find yourself in the red, but you can fill the gap with a small loan, thanks to online lenders. The lending industry has drastically evolved.
Traditional lenders will never sign off on a small loan application, but online lenders have made borrowing more flexible by going the extra mile. They do not judge borrowers only on the basis of their credit history.
There are several small loans that you can try while being caught unawares by unforeseen expenses. Each of the loan options has its upsides and downsides. A rule of thumb says that you should think carefully.
1. Unsecured loans
Unsecured loans are personal loans. They come in different sizes and do not require collateral. If you borrow a paltry sum, you will be required to clear the debt in full on the due date. However, a larger sum is paid down over a period of months. The repayment length should not be more than 18 months.
Lenders would like you to have a good credit report, as these loans are not attached to collateral. No lender will approve your application for a more considerable sum if your credit history is not so impressive.
However, a lender can make an exception if you need money to fund emergency expenses. Credit history is checked, but making a lending decision is not the be-all and end-all. A lender would emphasise your repaying capacity. However, these unsecured bad credit loans might charge slightly higher interest rates.
2. Unemployed loans
No banks or mainstream financial institutions will offer you a loan when you are jobless, but you might face unexpected expenses. Savings will come in handy, but it is likely that they are not sufficient to meet that expense, or if you decide to throw them at unforeseen expenditure, you will not be able to meet your regular expenses.
Direct lenders could give the green light to your loan application if you prove that you can pay off the debt on time. As loans for the unemployed are available from direct lenders, it does not suggest that you do not need to have an income source. A lender will consider unemployment benefits, child support and other benefits as your income.
If you have a part-time job like walking a dog or babysitting, you can club this income as well. A lender will see your monthly expenses and then determine how much you can actually pay. This is an integral part of the application process, so you do not fall into an endless cycle of debt.
Unemployed loans are also called loans for people on benefits. This is because you can take out them based on the amount of benefits you attain.
3. Borrow from family and friends
Borrowing from friends or family is the easiest option to borrow. For instance, when you are jobless, and you are unable to secure an unemployed loan at attractive interest rates, you can turn to your friends or family.
Seek financial help from your parents. Do not fight shy of taking help from them, and do not think that you are belittling yourself. Make sure your parents can actually support you in your hour of need. If they are unable to help you, you can turn to your friends.
Whether you borrow from your family or friends, keep your promise of paying off the debt on time.
4. Credit cards
Credit cards are another convenient way to borrow money when you need it for an emergency purpose. If you have a credit card, you can use it for any purpose, and then you will be required to pay off the balance within the given timeframe.
If you manage to pay off the whole balance before the due date, you can avoid paying interest. Otherwise, hefty will accrue per day basis. At the time of using your credit card, make sure you do not consume more than 30% of the available credit card limit.
Your credit card provider may report your credit card balance to credit reference agencies before the bill is paid, so your credit score will plunge due to a high utilisation ratio despite paying off the balance on time.
You should try to clear your balance frequently within the interest-free period so that when your credit card provider reports your balance to credit bureaus, it is not too much, and your credit report stays intact.
5. Text loans
Text loans are very convenient to apply for during an emergency. You are eligible for these loans if you are already registered with your lender. Just type a message and drop it. As your details are already saved with your lender, they will quickly make a decision.
What do you need to qualify for small loans without further ado?
Here is what you should qualify for small loans:
- You should have a decent credit score. This helps you to be eligible for lower interest rates.
- You should keep your credit utilisation ratio as low as possible.
- The debt-to-income ratio should also be low. Experts suggest that it must not be more than 30%.
- Do not apply for multiple applications because it will lower your credit rating.
In addition, it is crucial that you borrow money from a reputed direct lender. Some lenders may make false promises to extortionate money.
Do proper research so you do not end up falling into a trap. Compare interest rates so you choose an inexpensive deal. FloraFinance provides small loans at the most competitive interest rates.
Even if your credit score is not so perfect, you will likely get money at a lower interest rate than the others.
The bottom line
There are several loan options that can fund your small needs, and you can get them conveniently. However, each loan has a specific purpose. Not all types of all loans are suitable for all conditions.
Further, you should carefully assess the upsides and downsides of loans. Borrow money from a lender known for its reputation.
Ellie Brown is a proud resident of the UK and love to be a content writer and editor for the last 9 years. Writing blogs and articles is her passion that one can explore at the top blogging platforms. Ellie holds a key position at Florafinance as the Senior Content Editor and Chief Loan Consultant, leading a team of more than 70 professionals. Ellie Brown covers the major aspects of the UK’s lending industry in her blogs and guides loan seekers who come at Florafinance to apply for a loan. She possesses the Post-Graduate degree in Finance and Investment.