Understanding How Small Personal Loans Work

We've all faced a situation where an unforeseen expense took us by surprise, and we didn't have enough money to cover it, even though it was a modest amount. These unexpected expenses can be anything – a sudden visit to the doctor, home repairs, or having to send money back home. Even though you might already have a fund for emergencies, you may not want to use that for such small expenses. Some of you may be trying to achieve a savings target and may not like a small payment to come in its way and delay meeting your savings goal. However, covering all unexpected expenses, however small, is very important. They can snowball into a big problem if you don't meet them on time. All the examples mentioned earlier involve small amounts of money – but they are pressing needs all the same.

So, what do you do? Taking out a personal loan is usually considered a last resort when you've explored all your options. There's also this notion that people take personal loans for significant expenses, like emergency surgery, home renovations, or paying off debt. So, what are your options if you gave to cover a small but pressing need? You can put it on your credit card, borrow money from family/friends or use small personal loans. Credit cards are a costly option, and borrowing from family/friends can be embarrassing. So, getting a small loan is worth a try. In this article, we're going to understand how small personal loans work.

What is a Small Personal Loan?

There's no standard definition of a "small personal loan". Many personal loan lenders may have their own reasoning behind what constitutes a small personal loan. The term is generally used to refer to loans of roughly ₹10,000 - ₹15,000. A small personal loan works just like a personal loan. Your loan provider will look at several factors to decide your eligibility for a small personal loan. The most important is your CIBIL score. Apart from that, they will also consider factors like your repayment capacity and your documents. Typically, you need a CIBIL score of 750 and above, even for a small amount loan. But some lenders may allow for a slightly lower score (700 and above) if they're convinced about your repayment capacity and if your documents are in order.

When Should You Get a Small Personal Loan?

It’s recommended that you get a small personal loan in the below scenarios:

1. You have to take care of a small expense without dipping into your savings.
2. You don't want to clear the unexpected expense with your credit card because of the high interest rate involved. Or you already have considerable credit card debt and don't want to add to it.
3. You want to steer clear of high-interest debt like payday loans.
4. You don’t want to borrow money from friends or family.
5. You can't apply for a loan from the bank because they have a minimum loan amount restriction. Borrowing more than you need is always a bad idea.
6. This is your first loan, and you have prior credit history. Taking out a small amount loan and repaying it on time will boost your credit score.

How do you apply for a Small Personal Loan?

Applying for a small personal loan is simple and straightforward. The following are the steps involved:

1. Submit your online loan application on your lender’s website/mobile application. You’ll need to provide your personal, financial, and employment details and upload all the relevant documents.
2. Your loan application will then be sent for approval. If the information provided and documents submitted are in order, you'll receive quick authorisation within an hour.
3. Select your loan amount & repayment tenure and provide your bank account details.
4. Your small loan will be transferred directly into your bank account.

Use the funds and take care of that small yet essential expense on time!

Wrap Up

Taking out a loan should always be your last option while trying to meet your financial needs. However, suppose the need is small yet equally urgent. In that case, small personal loans are a better option than credit cards or payday loans. If you're looking for a reliable loan company that provides quick access to small personal loans, turn to KreditBee. It is India’s leading personal loan platform that offers hassle-free personal loans for working professionals. To get more information on how you can avail of a business loan with us, email us at [email protected], and we will take it from there.