In simplest terms, consumer lending in the UK is financing personal, business, household, or family requirements. It is the reason behind the all-expanding short-term loan market. Small loans are one of the most popular loans in the country. It eliminates any requirements of a stellar credit history, guarantor, or collateral. It is the reason around-
” 59% of Brits take out loans of £5000-£20000 and around 15% among these borrow around £5000 for short term needs.”
The minimum amount one can borrow as per Halifax is £1000. Small loan types like- doorstep loans offer loans up to £1000 at the door for urgent purposes. The blog discusses other types and a brief about small loans.
What are small loans?
Small loans are short-term loans ideal for emergencies and everyday purposes like home improvement, urgent repairs, unexpected bills, or credit card payments. These are highly unsecured loans one may qualify for by providing income proof. The repayment period is around 12 months.
A borrower can take an amount of up to £5000 both online and offline for short-term needs. Although the loans come with repayment flexibility, one should not expand the payments unnecessarily.
The reason is these loans have competitive interest rates. If you borrow a sum more than your requirement, you may struggle to pay it. You pay the amount in easy monthly instalments. If you make regular payments on the loan, you can clear the loan.
What can you use a small loan for?
According to Shawbook’s statistics,
“Individuals borrow £1000-£5000 to cover unexpected costs such as car repairs or home repairs. Whereas 26% of individuals aged 65 use the loan the most to cover lunch, bus fares, or coffee.”
Apart from covering unexpected costs, one can use it for other purposes:
Who can qualify for fast loans for critical needs?
One can get small loans by meeting minimal criteria. It does not require any complicated documents that may delay the sum sanction. If you meet the criteria, you may get one for your needs.
You may get the loan if you meet all these conditions.
As per MoneyExpert,
“Individuals applying for short-term loans earn £12000/month on an average.”
However, individuals earning below the parameter can also qualify for a sum under short-term finance.
What are the advantages and disadvantages of short-term loans?
Short-term loans help you manage every urgent requirement without missing the opportunity. You can leverage them anytime you have some critical bill payment. It is the easiest way to avoid additional payments like- late fees or penalties.
However, there are some disadvantages too. To know both, read ahead.
For example,
If £40000 of £45000, your income goes towards rent, household expenses like- groceries, big purchases, child school fees, mobile and subscription recharge, and stationary, etc., you may miss important payments like- telephone bills (£1000). You do not have to wait until your next salary and pay an additional late fee. Instead, you can pay it before the deadline using small loans. You can get the cash immediately in your account without detailed paperwork or credit analysis.
Advantages of small loan | Disadvantages of small loan |
---|---|
Receive funds within 30 minutes of application approval | Competitive interest rates may rise if you miss a payment or two |
No credit score obstacles. Anyone can apply regardless of the credit score. | Missing payments in a row can lead to a debt cycle and impact credit scores. |
No detailed paperwork or documents required | These loans are addictive due to the ease of borrowing |
No deposit required | Too many bad credit small loans may impact your ability to qualify for mortgage payments. |
Can an unemployed get small loans for emergencies?
Yes, an unemployed may qualify for small loans if he can prove the ability to repay the amount. They can loan up an amount by presenting any income proof-like-
If you own any of these incomes and have a consistent flow, you may qualify for small loans for the unemployed people with us. We do not charge any additional fees that may impact your budget. Moreover, you can rationalise the flexibility to choose any repayment structure as per your finance and re-schedule payments if the present agreement does not fit the need.
How can you up your chances of loan approval on bad credit?
Though these loans are the easiest to qualify for, only 80% of applications get approved. There are ample reasons behind a lender rejecting a loan application.
As per Credit.org:
“The most common reason for an application rejection is low debt-to-income ratio”
A debt-to-income ratio is the ratio of income to total debts one has. You have a low debt-to-income ratio if you earn £30000/month, but your debts total £28000. Similarly, if your debts are £10000 with the same income, it indicates a good debt-to-income ratio. You may qualify for better interest rates in this case.
Here are some ways to improve your loan approval chances:
1) Identify the total liabilities before applying
It is important to decide the right amount before applying. If you have too many liabilities, it is ideal to borrow a lower amount than you need. You may get quick loan approval in this case.
2) Analyse the delinquencies and report
You may not get a small loan if your credit report has too many errors. Before applying, analyse the paid and unpaid debts. Report the paid debts if they still reflect on your credit report. It will help you ensure a responsible profile.
3) Explore your options before applying
Every individual has unique financials and circumstances. Thus, explore the quotes from different providers. You may find it easier with a broker, but brokers may not be the best choice for short-term loans. You may get delayed in finding one with low credit. If you need a personalised loan quote within 30 minutes, fetch a loan for bad credit with no broker interference.
4) Check the spelling on the form before applying
It is one of the common mistakes that borrowers make while applying for loans. It is due to the urgency of having one. However, if the lender finds a discrepancy in the details or it does not align with the original ID and income proof, he may reject the application. Always review the contents before applying.
5) Consolidate some debts
Identify whether you can consolidate some small loans like- payday loans, no guarantor loans, doorstep loans, quick loans, etc. It would help you qualify for low-interest rates.
Should I get a small loan at 1OneFinance?
Yes, you can get one from 1OneFinance if you seek – flexible payments, an easy-to-follow application, comfortable eligibility criteria, and minimal documentation. We ensure the best and most responsible lending policies and help you manage loans comfortably. It does not impact your budget’s bottom line.
Jessica William operates as a Senior Consultant and Chief Content Editor for 10 years at 1Onefinance. She assists the firm in getting a grip on the new lending laws and regulations. She does so by researching the trends, consumer requirements, and new audience preferences. Jessica is responsible for making important financial and administrative decisions.
Apart from helping consumers with the best solutions, Jessica Williams helps them ensure financial stability. She analyse the business data, finances, expenses, and revenue/ income of customers and determines necessary changes. Jessica finished her Doctorate in finance and law and implements her knowledge to the best interest of the firm and customers.