Small Loans

When people talk of loans, they are usually referencing large sums of money that one gets when they are in some sort of dire financial need or simply need a great deal of money to pay for a car, vacation, what have you.

Rarely are they talking about small loans - Loans of a couple hundred pounds that are needed over a short period of time.


Are Small Loans Possible?

Small loans are indeed possible, but the speed with which you need the loan often dictates how good a value it is.

For example, many people that require small loans tend to go for payday loans (loans of any value that are paid before payday). But payday loans are far too expensive considering their cost. They are okay if you are getting only 50 or 100 pounds as the fee, though still high, does not represent a significant financial setback (400% APR on 50 pounds is still only 10 to 15 or so pounds) but once you reach the 200 and 300 pound range, the rates are simply too extreme given the amount of money. Ideally, these would be avoided.

If you have time to fill out loan applications, then you can get small secured and unsecured loans. These will often require immediate payment, where the loans need to be paid off in a few months, but the loans will be at a much lower rate than the payday loans and will not usually affect your budget as severely.

Remember, however, that a credit card is also essentially a lending tool. If you need a few hundred pounds, and you have money on your credit card, you may want to use your credit card instead. If you can avoid it, you do not want to take out additional loans as these can look bad on your credit record. Similarly, credit cards have an APR that is vastly lower than the payday loan alternative, and credit cards can be used immediately without the need for waiting for loan approval.

Ideal Credit Card Use


If you can afford to pay for something in cash, you will rarely ever be told to use a credit card by any financial expert trying to tell you how to keep your credit score high. But credit cards were made for "small loans" - small amounts of money that you need for a short time that you will be able to pay back in the not too distant future. That is their ideal purpose, and it is okay for you to use it as such.
Personal loans, both secured and unsecured, are your next best choices. But use your credit card if you can to avoid any credit score backlash, and try to refrain from payday loans at all costs.


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