The Advantages and Disadvantages of Small Loans
Unfortunately, the recession and the resulting down turn in the job market has left many people still suffering with the after effects. One of the ways some are choosing to deal with this is by taking small loans. While they can prove to be a short term solution, loans are still a form of debt that accrue interest, so it is important to be aware of all of the facts before signing a contract. However, small loans also have their benefits.
To make sure you know all of the facts, here are some of the advantages and disadvantages of small loans.
Huge Variety
Whether you are trying to source additional funds for a deposit, hoping to buy a car, or need to pay for emergency repair work, there are a huge variety of small loans suitable for almost any purpose. There are also a large amount of lenders for you to choose from.
Business or Pleasure
As well as a variety of personal loans, there are an array of lending schemes aimed solely at business owners. Whether you need start up capital or are planning on upgrading your premises, there are many different business loans to suit your specific needs.
Staggered Payments
When you take out a loan, you have to agree to a repayment schedule. These can differ greatly depending on the amount, the lender and your personal circumstances. The bonus here is the flexibility of smaller monthly payments, but it does mean a longer commitment.
Credit Score Conundrum
This is a double edged sword. Meeting scheduled repayments could improve your credit rating, but frequently missing payments could prove to be detrimental. To avoid this conundrum, remember that this is a long term commitment, so ensure that you can afford monthly payments before taking a loan.
Repayment Penalties
While you would be penalised for missing payments, it is important to be aware that early repayment can carry its own problems. In this instance, some companies charge an additional percentage of the loan amount, while others do not allow early repayment at all.
High Interest Rates
When in desperate circumstances, it can be easy to make rushed decisions. For example, there are many short term loan companies promising quick cash, but make sure you read the small print. These specialist companies often carry incredibly high interest rates which can leave you much worse off further down the line.
When it comes to borrowing money, it is crucial to make sure you know all of the relevant facts up front.
