Borrowing money is not a cinch. Traditional financial institutions follow more inflexible criteria when it comes to the approbation of a loan application. They demand stellar credit reports and repaying capacity. If you don’t have a good credit rating, you would face difficulty getting the nod from them. However, banks and traditional financial institutions generally provide personal loans and long-term loans.
Small loans are a type of personal loan, but they are not provided by banks. This is because their size is too small. The maximum amount you can borrow through small loans is not more than £1,000. These small loans are also known as emergency loans. They are aimed at meeting small emergency expenses. No banks and traditional financial institutions would let you borrow such a paltry sum to meet unforeseen expenses.
Applications for personal loans are entertained by banks, but they start with as little as £5,000. If you are looking to take out quick loans which do not let you borrow more than £700, you will have to rely on direct lenders.
Why are direct lenders the ideal choice?
If you are looking to apply for small loans, banks would not be able to approbate your applications. Emergency loans come with a paltry sum. Most of the time, borrowers do not need more than £500. If you need such an exiguous sum, you should consider borrowing from direct lenders.
One of the biggest reasons why they are ideal to apply for short term loans is that these loans are not available from banks. In addition, the following are the reasons why direct lenders are the best place to borrow a small amount of money:
Flexible borrowing
Direct lenders use flexible lending methods when it comes to signing off on your application. These loans are signed off on during emergency expenses. As you will need a quick injection of cash to meet unforeseen expenses, lenders usually process money as fast as possible. You cannot wait until you arrange for cash to meet unexpected expenses, and therefore, lenders are not strict about approval criteria.
A Bad credit rating is not a problem
A bad credit score is a snag to qualify for a loan. Banks do not accept applications from poor credit borrowers as they are perceived as risky borrowers. They prefer you to secure your loan if you want money with a bad credit rating. But direct lenders approve applications despite an abysmal credit rating. However, an application is approbated only when the borrowing amount is small, not more than £1,000, and yet high interest rates are charged.
If you have to take out urgent door step loans, high interest rates will be charged. Lenders charge high interest rates in order to mitigate their risks. A poor credit payment in the past could call your credibility into question. It will affect your future ability to borrow money. Lenders would believe that you might make a default down the line, too.
However, the approval criteria do not include hard checks. Most of the lenders make their lending decision based on your income. If you can repay the debt, they will lend you money without further ado.
Flexible repayment plans
Another benefit of choosing a direct lender for a small loan is that they offer flexible repayment plans. Most of the time, lenders require you to pay down the debt in a lump sum. If the borrowing amount is beyond £1,000, they might require you to pay off the debt in fixed instalments. However, online lenders are sometimes flexible with repayments.
If you lose your job or struggle with a lump sum payment, they might require you to put down the debt in fixed instalments, which could be bi-weekly or monthly. If your loan is to be paid down in fixed monthly instalments, they may provide you with a payment holiday. Sometimes, they also defer payments or require you to pay a minimum amount. However, which method they follow, interest will be accrued on the unpaid balance.
Banks are not as flexible as direct lenders with repayment plans. Once you commit a default, your credit score will be hurt. If a loan is secured, they could even take your collateral into possession and liquidate it to cover their money back.
What further specialities should you keep in Mind?
Although direct lenders are the best place to borrow small loans, you will be able to receive the nod regardless of your credit history as long as you have a strong repaying capacity. But you should be attentive while employing these loans.
- Borrowing money from direct lenders is not so easy. If your credit score is less than the bare minimum rating that they have set for approval criteria, your application will be repudiated.
- Most of the lenders would be indisposed to lend you capital when your credit record is extremely poor. If any lender somehow approves, very high interest rates will be charged.
- Most of the time, short-term loans are paid off in full in one swoop. As interest is also paid on top of the principal amount, it could be challenging to clear the debt. Once you fall into debt, it would be extremely complicated for you to get out of it.
Summing up
If you need a small amount of money to meet unforeseen expenses, direct lenders would be an ideal choice. This is because banks do not approve an exiguous sum of money. Direct lenders use a flexible repayment plan. Above all, they do not mind accepting your application despite a bad credit rating.
Make sure that you take out these loans only when you are entirely sure about your repaying ability. These loans are quite expensive. There is a possibility of falling into an abyss of debt. Do not throw caution to the wind while taking a small amount of funds..
