Suppose you are going through a medical emergency and need a small amount to overcome this setback. But you don’t want to apply for a big loan and fall into the process of paying EMIs for a more extended period. So, what can you do instead? In such situations, small loans are the perfect option to go for! However, before applying for small loans, it is essential to learn everything about small loans, their features, how to select the best small loan, eligibility criteria, the documentation required, and the steps to apply for the small loan. Read on!
Demystifying Small Loans
Known as a type of unsecured personal loan, small loans are extremely useful for people looking forward to borrowing a small amount for a specific purpose. The loan terms are shorter, and lenders allow borrowers to pick the repayment term as per their suitability. Here are some of the critical features of small loans:
- These small loans are easily accessible in comparison to the other larger loans as they have relatively low stringent requirements.
- The lenders don’t ask for any collaterals when it comes to small loans, hence why they are known as unsecured loans. Salaried individuals and young adults can easily apply for these loans.
- The application process is hassle-free, and considering there’s no collateral, the lenders give instant approval to such funds.
- You can apply for small loans from various sources, such as online lenders, financial institutions, credit unions, and microfinance institutions. However, you need to be careful when applying for small loans and ensure that you go ahead with the right one.
How to Select the Best Small Loan?
While selecting a small loan, there are various factors that you need to keep in mind to ensure that you choose the right one:
- Evaluate the interest rate before you apply for any loan. Customers with good credit scores get competitive interest rates. If you have a low credit score, expect to pay a little higher interest rate.
- Carefully determine how much money you require and only then apply. Check whether the lender offers a small loan or not.
- Consider the loan term, as your interest rates also depend on the same. Since you will be applying for a small loan, you can choose a short loan term and repay it quickly. However, remember to pick a term that suits you well and will not put more pressure on you.
- Check whether they are asking for any collateral or not. Small loans are unsecured loans, and no collateral is required. However, it can differ from lender to lender.
- Enquire thoroughly about the lender. Apply for a small loan from a reliable lender that is credible.
Eligibility Criteria to Apply for the Small Loan
To avail of the small loan, here are the eligibility criteria that you need to meet:
- You should be a resident of India.
- Should either be a salaried employee or a self-employed person
- You should be at least 21 years of age while applying for the loan
- Should earn a particular amount to qualify for the loan
Documents Required to Apply for the Small Loan
Here are the essential documents that you need to submit while applying for a small loan:
- Identity proof (Aadhaar card, voter ID, or passport)
- Bank statement for the last six months
- Passport-sized pictures
- Proof of income (can be income declaration statement, income tax return, or last three month’s salary slips)
Steps to Apply for Small Loan
Applying for a small loan is an easy process. Here are the few steps you need to follow to apply for the loan smoothly:
- Once you have carefully processed all the points mentioned above, select the lender (can be both online and offline).
- If it is an online lender, download the application. If not, then visit the nearest bank or institution.
- Check whether you meet the eligibility criteria or not. Only proceed if you do.
- Complete the documentation and fill in the amount you need as a small loan.
- Submit all the required documents as asked by the lenders.
- Complete the additional formalities, if any (differs from lender to lender)
Once you have completed the entire application process, the lender will start reviewing the application form, and once it meets all the requirements, the amount will be credited to your account within a few hours or a couple of days.
Regardless of how streamlined your finances are, emergencies may require you to apply for a loan, and a small loan is just the right pick. Small loans can serve as valuable financial tools for individuals and businesses in need of quick and accessible funding. With their relatively low loan amounts, streamlined application processes, and shorter repayment periods, small loans offer convenience and flexibility. Remember to borrow only what you need and ensure you have a solid repayment plan in place to maintain your financial well-being.