A small loan usually ranges between 1,000 and 5,000 dollars and is more used for short-term financing. Classic examples of the use of small loans are repairs or replacement purchases. Sometimes a little more money has to be available quickly. In our small loan comparison, we show you where you can get the best conditions for it. The details of the respective offers can be found in the product tests.
Using our comparison of the current conditions, we have prepared a sample calculation that compares the small loan with the overdraft facility.
In order to answer the question of the really best provider for loans with small amounts, we have developed a comprehensive perhaps even the most extensive – test scheme. It takes into account six different categories with a total of 34 characteristics and shows you the very latest test results every day.
Small loans create financial flexibility
Whatever comes your way, you are thinking about a small loan (actually a “personal loan”) to bridge a short-term shortage. A small loan, as the word suggests, is a loan for a comparatively small amount.
Loans are rarely the first choice for private individuals. After all, having to pay interest is not popular. Nevertheless, sometimes high bills have to be paid spontaneously. A craftsman or the auto repair shop, for example, insist on prompt payment of outstanding amounts. Or you can find an offer that is too good to miss because of a lack of cash reserves.
The offers on this page are suitable for private purchases or invoices that come to you quite spontaneously. Small loans are an excellent way to cushion the financial burden. The alternative would usually be to use the overdraft facility (short: overdraft facility) or to overdraft the checking account. Both are quite expensive for the customer: On average, the overdraft rate is currently around 10 percent, the interest for overdraft the checking account is around 13.5 percent.
We recommend Good Credit if you want to take out a small loan. You can get a loan there from $ 2,500. The interest starts with Good Credit at an interest rate of only 1.99% APR. You already receive direct confirmation online and can have the money very quickly.
Example calculation: Dispo vs. small loan
The offer is only available at short notice and the furniture store does not offer to finance for this bargain. His account balance plus overdraft facility would be enough to pay the bill, but he is terrified by the high overdraft interest. He has never taken out a small loan.
Now he is considering that he should look at the types of credit separately and for the full purchase amount in order to get a better comparison. In addition, he only takes a look at the pure overdraft facility for the comparison and ignores other sales on the checking account.
He pays the bill with his overdraft facility. If he spends a little less every month, he estimates that he should be out of the disposition again in 12 months and write a black zero. 200 dollars seems to be a good first value for the repayment.
He remains in the credit area with his checking account. He obtains the liquidity he needs from a small loan, which he would like to repay in 12 installments a month. Here, too, the credit rate is 200 dollars.
Things look a lot better with small loans. At the end of the year, there was only a little more than 40 dollars in residual debt on the account. Or to put it another way: he saves almost 100 dollars, which he can put in new kitchen equipment, for example.
Small loans are often very useful. Because sometimes you are already expecting money between $ 500 and $ 5,000 in the near future, for example from a home savings contract, an invoice or a distribution. If you have already fulfilled a wish or made another investment by this date, the banks will offer you the best deals in the comparison above.
We would particularly like to mention Lite Lender at this point. It offers the best interest, even with the smallest loan amount that you can apply to banks.
Well-known major banks rarely offer small loans or, if they do, they offer high-interest rates because they simply don’t pay off. Smaller banks or direct banks, on the other hand, calculate differently. That is why in our comparison you will find among the best more direct banks than well-known major banks. You can find this comparison here: Private loan comparison
Why are loan interest rates different?
It goes without saying: those who borrow money have to pay interest. But why actually? In the end, it is a payment for a service. The customer receives something for which he has to pay a certain price. In our case, it is not a rental car, but money in the form of a small loan. So the interest is actually the payment to the lender for borrowing money. Just like with a rental car, it is not enough to just pay the rental fee, but of course, you have to return what was borrowed.
There is also a risk factor that is remunerated via interest. The amount of interest is subject to many influences. First, it is important how long the money is borrowed. The creditworthiness of the lender and the risk to the bank also play a role. Then there is the general market situation. In many cases, the amount of the loan is also an aspect that influences the amount of interest. We summarize the factors:
- Duration: The longer the term, the lower the borrowing rate (compared to the various types of credit). Example: Overdraft facility vs. Home loan.
- Risk: The more certain it is that interest and repayments are made, the lower the (credit default) risk for the credit institution. Therefore, the interest rate is also lower. This aspect weighs more heavily.
These considerations do not apply 100% to standard products such as small loans. Here, the interest rate increases with the term of the loan. However, safety concerns resonate with this consideration, so that the above rule applies indirectly again.
Experience has shown that a person is less solvent when it takes longer to settle a debt. If a person promises to repay 2,500 dollars within a year and another takes maybe four years, the latter can be assumed that the situation is generally somewhat more difficult. In addition, more can, of course, happen over a longer period of time, making it difficult to repay the loan. As already mentioned: if the risk increases for the lender, he rates this risk in excess of the interest rate.
When a limited amount of money has to be spent spontaneously at once, small loans are always the better alternative. As you can see from our small example, this makes a clear difference even with short terms. This form of credit is highly standardized. The advantage is obvious: they are easy to compare.
Questions that you can influence when making your decision are the questions about the credit rating and the service provided by the loan provider. In our comparison, we show you all relevant aspects for simple small loan business. Check the terms, your individual monthly installments, and the lender’s acceptance and recommendation rates. This is how you can quickly and easily find the small loan that best suits your needs: