Real credit: Even a small loan is a real credit that requires creditworthiness and is entered in the Credit Bureau. Only the loan amount is usually less than $ 10,000. It is therefore called a small loan.
Fast processing: Small loans can be processed more quickly by the bank due to the low loan amount and the resulting lower risk. This speeds up the commitment and payment to your account. Compare online: Even with small loans, you should always carry out a condition comparison at several banks. Even if it’s only about small sums. There is usually a savings advantage. Debt rescheduling: A small loan is also often used for debt rescheduling. For example, to redeem a residual amount of old financing or to reschedule the overdraft facility.
One speaks of a small loan if a maximum loan amount of $ 10,000 is required. However, this can vary depending on the bank, as there is no general regulation of the amount up to which a loan is a small loan. As a rule, however, it is often the maximum limit of $ 10,000.
The chance of getting a small loan is also higher than, for example, with real estate financing. The bank will still check your creditworthiness and request proof if necessary. However, the process of approval and payment is much faster.
Example invoice for a typical small loan
In the following example, we assume a small loan in the amount of $ 5,000, which is concluded over a period of 3 years with an interest rate of 5%. The following values would result for your financing.
However, this calculation is only a sample calculation. With the help of our comparison calculator, you can compare various offers from different banks directly online. This is done in less than a minute.
Compare small loans too
Small loans should also always be compared, even if it is only about $ 5,000. But it still makes a difference whether you only pay 5% or 8% interest. In the example above, the savings advantage would be $ 245.79 if you only pay 5% instead of 8% interest.
However, keep in mind that small loans are also reported to Credit Bureau. In your own interest, you should therefore try to repay the loan as quickly as possible. By changing the runtime in the comparison calculator, you can see how the monthly rate changes. Choose a rate that fits your budget well, but don’t let the loan run for an unnecessarily long time.
What does the bank check when applying for a small loan?
Since small loans are not a major risk for banks, approval and payment are usually quicker than with larger loan amounts. Nevertheless, the bank will check your credit rating. This is done through different measures.
Querying the Credit Bureau score
The easiest way to check your creditworthiness is to query the Credit Bureau score electronically. This is a score of 1 – 100, which Credit Bureau determines as an overall rating in your information. The bank does not have to check individual positions in your Credit Bureau, but only has to query the score. This is usually done automatically while you are making the application. If the Credit Bureau Score is above a certain value, your chances are very good. If it is too low, the bank will usually decline immediately. The Credit Bureau score query is the most frequently used method when applying for a small loan.
Electronic account view
The “electronic account view” also enables a fairly modern procedure. This usually works whenever you use online banking. When you apply for the loan, you enter your online banking access data and the bank’s systems log into your account virtually in the background and check certain parameters that the bank defines as an important prerequisite for financial viability. For example, if your account has been in the red for a long time or there have been several direct debits in the past, then there is no longer a good chance of getting the small loan.
Salary statements & general financial situation
Depending on the bank, proof of salary may also be requested. Most of the time, the bank wants to see the last 3 pay slips or proof of payment on your bank statement. With a good credit rating, a small loan can also be approved without a current job. However, this is decided by the bank. The bank will also query your general financial situation. You usually have to state your income and expenses. The bank can then easily and quickly view your financial situation from this budget calculation and make a decision based on it.
Debt the overdraft facility with a small loan
Small loans are also often used to repay overdrafts. Because it quickly happened that you overdrawn your account and now pay expensive overdraft interest. If it is then foreseeable that it will probably take longer until you have made up for this deficit, then the small loan is a good alternative to bring the account back into the green.
If you are applying for a debt to reschedule, it is best to always specify “rescheduling” as the purpose. After the loan has been paid out, your account is back in positive territory. You still have your debt, but have now reallocated at significantly more favorable terms.
How to apply for a small loan
- Credit comparison
In the first step you should use our comparison calculator to find a cheap bank. To do this, select the required amount on the computer, enter the desired term and select “Free use” as the purpose.
- Apply online
If you have found a cheap small loan, you can apply for it directly online. All you have to do is enter your personal data and a few details about your financial situation.
- Submit documents
The bank will now examine your application and, if necessary, request further documents such as proof of salary, the original signed application and an identification procedure. You can usually do this conveniently online.
- Wait for credit to be paid out
As already mentioned, the check for small loans is very quick. You should have already received an acceptance or rejection within a few days. If the creditworthiness features are tougher, you will usually receive the rejection when you apply. However, if everything fits, your money will be paid directly to your account.