To most people, the task of raising money to pay for improvements or consolidating a range of debts comes down to getting a small personal loan from their bank.
Of course, simply being able to gain access to such funds makes life that bit easier, but there is more to it than getting a chance to cover the unexpected expenses, or maybe a major project, in one go. An unsecured personal loan can actually save a considerable amount of money too, making it a wiser option to alternative payments methods, such as a credit card, for example.
Getting a small loan for personal use is not usually considered such a major trick. In fact, it is a very common practice, especially for unexpected expenses, like a hospital fee or medical expenses, or even periodical luxury purchases, such as a vacation to Europe or the Caribbean.
But while getting such personal loans is nothing strange, the full extend of the advantages of a small loan goes beyond these things. There is much more to it than simply accessing a convenient source of funds.
Make Significant Savings
The fact is that a small personal loan can provide a way to make major savings. This is because small, short term loans can come at quite low interest rates. It is not unusual, for example, for such a loan to come at less than 6 per cent APR, which falls quite some way below the usual credit card rate.
Obviously then, small loans for personal use can be less expensive than the arguably more convenient credit card payment. In fact, over the course of a year, for example, repaying the loan could save several hundred dollars. Even for larger sums, an unsecured personal loan can outdo an equity home loan, saving thousands of dollars.
Of course, the only way to make sure that real savings are made is to get the best interest rate possible. It is important then that loan options are explored, but competition is so high in the market that it is not difficult to find small personal loans at low rates. This is especially true on the internet, where smaller lending companies do what they can to attract more business.
Also, keep in mind that small loans for personal use tend to be below USD 10,000, with anything above that is considered a more significant loan deal. It is a different matter if the loan is secured by collateral, where a significantly larger sum can usually be secured against property equity or a vehicle.
Finally, the duration of these unsecured personal loans is also a factor, with the longer the period of the loan the greater the amount of interest paid. By getting a relatively short term, say 3 years for example, even more savings can be made.
Other Uses for Small Personal Loans
Of course, there is no shortage of uses for these loans with the whole concept behind small loans for personal use being that the funds can be spent in any way the borrower sees fit. In this respect, they are not the same as auto loans, for example, which are issued for specific purposes.
The great advantage of unsecured personal loans with open ended purposes is that the funds can be left in a bank account and delved into as and when necessary. So perhaps some will go to medical expenses and some to educational expenses.
What matters is that, in the long term, money is saved and those savings can then be spent on other things too.