People say that online loans are just hype but they are not. Small loans are real transactions that require your scrutiny before getting entering any deal. Like most things, you need to know how the industry works in order to better understand the principles behind these small loans. So to help you decide if small loans are the right solution to your financial woes, here are some of the things you need to know.
1. What are small loans?
Small loans are short-term loans that must be paid back, together with the interest, on your next payday. In other cases, you can pay back your small loans after a month.
2. What if I have bad credit?
The beauty of online small loans is that they are not credit-based. No credit check is required to obtain this loan so you can take advantage of these services even if you have a bad credit rating or no credit history at all.
3. What are the documents required to obtain small loans?
To correctly gauge your capacity to pay back the small loan you are planning to take out, you will be asked to submit at least the following proofs:
• Stable employment for the last three months
• An active checking account
• A US citizenship and age
Your detailed account information will be requested during the application process wherein you will be required to fill out an electronic form that is accessible from the lender’s website.
4. How is the amount of small loan determined?
It does not follow that the amount you applied for will be the amount that you will be approved for. This is because the approved loan amount will be based on your income. Most lenders would calculate only 35% of your income especially if you are a first-time borrower.
However, if you are able to establish a reputation of a good payer, your maximum loan amount is likely to increase on succeeding transactions.
5. Are there any restrictions on how you can use small loans?
Unlike bank loans that would require you to submit to their conditions on how you can use your loan, the best online lenders would not impose rules on you. As long as the amount is in your bank account, it is yours to use depending on how you see fit.
6. Is a small loan application still processed over the weekend?
Since the lender is web-based, they are not bound by the idea of business hours. All applications for small loans that are received over the weekend or during holidays will still be processed and feedback will still be sent the following day.
7. What if I suddenly realize that I don’t need the small loan?
If the money is already in your account by the time that you realize this, you can simply return it the end of business day on the next day. Fees and interest rates will not apply in this case.
8. How is payment made?
In most cases, payment for small loans will be automatically deducted from your checking account. You can either pay via daily installments or one-time payment. If in case you have the money to pay off a small loan way before the due date, make sure that the lender does not impose prepayment penalties.
9. What happens if I cannot pay the small loan back?
Not only will this affect your credit score, it will also mean additional fees for you. So if a situation arises leaving you unable to pay the small loan back on time, you need to discuss alternative solutions with your lender. There are lenders who will freeze the interest rate for you after 60 days of nonpayment.
10. Are small loan transactions online secure?
The answer to this would depend on your lender. That is why it is important that you transact with a lender that has been recognized by your state. This way, you would know for sure that the contract you signed is legal and that your information will not be sold to anyone, and for whatever reason.
On top of that, there are a few indicators of a secure website. First, there’s the https:// in the address bar and second, there would be seals of security displayed on site.
Bear in mind these ten facts to be properly guided on your every small loan transaction.