The small loan has many names such as “personal small loan” or “instant loan”. The reason lies mainly in the simplified handling of the credit by the banking institutions. This is primarily due to the amount of the loan. For very small amounts, however, one speaks only of a so-called small-credit. However, the procedure for the respective forms of credit is the same.
Low loan amount and short term
As the small loan says, in such a loan rather loan sums up to 5,000 euros paid to the borrower. Everything that goes beyond that is no longer in the category of small loans. As a rule, small loans are taken in a range between 500 and 1,000 euros. They help individuals with temporary liquidity problems.
Another key feature of small loans is shorter maturities. The term for a Small Loan is usually 6 to 24 months. The lower the loan amount, the lower the term. Individual arrangements can be made with the lender, however, in which long terms for rather small amounts of credit are agreed to reduce the monthly burden.
Higher interest charges
No bank will lend without making a profit. As small-credits are fairly small, interest rates are set higher. Although these do not have such a clear impact on small loans, banks are setting a higher profit margin. The lender is required to disclose the APR. Thus, borrowers also have the opportunity to compare the different loan offers and thus enjoy complete transparency.
For Small Loans, potential borrowers can often find relaxed conditions. A credit bureau information is not provided in many cases, because they are often not relevant for small amounts. However, if you want to apply for a higher Small Loan, the solvency is checked here. Credit collateral is in most cases not required.
Only a salary statement that guarantees a steady and secure income. This is how the borrowers secure themselves over their insolvency. Many Small Loans do not even require an indication of purpose. For example, consumers can use the loan to cover the account balance or to replace the discretionary credit.
In many cases, the Small Loan is used by people who are already at the limit of their disposition credit. Thus, free capacity for occurring bills or incalculable costs can be achieved again.
The simplified examination of the borrower guarantees fast processing of the application. Not for nothing applies to the Small Loan and the alias “instant loan”. As a rule, the bank needs only a few days until the documents have been checked and you receive a corresponding response to the application. The payment of the money is often done within a short time.
But even with a Small Loan, a loan agreement applies, which is to protect the bank from non-payment of the agreed monthly installments. In many cases, it is even the case that the borrower receives the loan commitment within one working day.
Small Loan from private to private
A small loan is not just a matter for banks. Nowadays, there are ways to get a small loan of the desired amount and at an agreed rate from a private individual. This is always done through a professional facilitator who can ensure that the lenders do not lose their money.
Individuals who have cash reserves and do not currently need them make them available and people with temporary cash flow problems will claim the loan amount they want. This is a win-win situation for both sides.
The lender can increase his money and benefit from the interest payments while the borrower solves the temporary money problems with the debt and repays the loan in monthly installments.
5 tips on mini credit
1. Who can take a Small Loan?
In principle, it is possible for almost everyone to take out a Small Loan. However, certain conditions must also be fulfilled for this. So the borrower usually needs to have a clean credit bureau with no negative entries. The credit rating is determined by a mini credit but also on other values. Most providers conduct internal scoring so that the credit bureau does not have the relevant meaning.
For example, if loans of this type have already been successfully received by providers earlier on, this considerably improves the value. However, the credit bureau is also tested. If there are affidavits, arrest warrants or bankruptcies in this affidavit, even a small loan will not be granted.
2. Repayment and conditions
Especially in the area of repayment, the customer must exercise caution and inform himself about all details. In most cases, small loans will be repaid within two to three months. Very small personal loans must also be referred back to the provider within a month.
At the same time, attention should be paid to the level of interest rates, as these make the small loans much more expensive. Therefore, they can not be recommended for pure consumption. Also a possible regulation for the delay of the payment should be read in the GAB or in the contract.
3. Private financiers
Alternatively, a Small Loan can also be requested from private investors. For this purpose, credit exchanges offer on the Internet, because investors are sometimes very pleased if they can deposit in short-term loans. The shorter runtime gives you faster returns. However, one should be aware that it is then a real loan, behind which is also a bank.
This will check the credit bureau and with appropriate entries can also be denied a payout. In addition one should inform oneself about interest rates and conditions exactly, because sometimes also handling charges rise, which make the taken up loan substantially more expensive.
4. Required documents
Also for a mini credit appropriate documents and proofs are required. Firstly, a Federal German identity card must be available. However, the borrower should also be able to produce a contract of employment. The conditions are not so strict with many providers as with the regular banks. Partly unemployed and ALG II recipients can receive a loan here.
However, the amount of revenue must be stored in such a way that the loan amount can also be repaid in the specified time, which is only rarely the case for recipients of basic security and ALG II. If you want to do the experiment, you have to upload your decision to the platform. Further documents are:
- current account statement with proof of receipt
- Budget statement confirming residence
- Business registration (for self-employed persons)
- Tax assessment (for self-employed)
- Income surplus bill (for self-employed)
5. In case of default
Above all, it is important that the borrower knows what happens in the event of a possible default. Here collection fees are not immediately incurred, but there are first reminder fees. Also, the loan agreement is not terminated immediately, but is a period of four weeks in the room to settle the total amount. However, different providers treat this differently, so sometimes even monthly installments are possible.
The disadvantage is above all that with a delay, the credit rating is not necessarily worse in the credit bureau, but then further borrowing from the respective provider is excluded. Therefore, the money should only be borrowed, if you are sure that you can repay this.
Small Loan provider
Many loan seekers only want to lend small sums of money to bridge short-term financial bottlenecks. Years of commitment to a bank make no sense. Rather, the money must come immediately on the account and the application is made accordingly fast and straightforward. Numerous providers of small loans have adjusted to these customer requirements and make it possible to borrow the corresponding micro-loans.
Private Small-credit – even without credit bureau?
In addition to the banks, there are also Small Loan providers in the peer to peer area. Private individuals provide loans to other individuals. The mediation takes place via a neutral platform. Both parties are also covered by these. Above all, the lender can protect himself in the event of a loan default.