Where to go for Small Loans? How to Find the Right Lender: There are many ways to go about the application for small loans as a borrower. However, what makes for a good lender? How do you know where you’ll find the best terms? And, how do you avoid predatory small loans from lenders, even if you don’t have the best credit score? Let’s delve into where to begin when applying for loans, what to avoid, and how to ensure you find the best terms as a borrower.
Where to go for Small Loans? How to Find the Right Lender
Where Borrowers Should Begin When Applying for Small Loans
You have to know where to begin when applying for small loans – Website. Do you go to a local bank? Should you ask family or friends? How about the borrower with less than stellar credit what should you do?
When the time comes to apply for your loans, these are some of the institutions you’ll want to begin with, and what you’ll want to avoid. We’ve also thrown in a few alternatives to loans to consider, if you need additional capital for any reason.
Credit unions are in place to HELP their members. They’re non-profit institutions, and they look beyond your credit score. In some cases, they offer interest rate discounts, and rates which are well below those of traditional bank lenders if you make automatic payments from your account. And, federal credit unions are capped in how much interest they can charge by the federal government. So, it’s never as much as you’d be paying a traditional bank lender. This is especially beneficial if you have less than stellar credit rating when applying for small loans with the institution
Look for credit unions which cater to military families or a specific demographic as well. If you fall into those categories, you’re likely to find even better borrowing terms and rates.
Not every bank offers a small personal loan. However, some do, so make sure you shop around. CitiBank is popular with members because of this. Not only are interest rates comparable in a highly competitive market, but they also offer reasonable lending limits (in some cases, up to $5,000 for some lenders with good credit).
Banks are stricter than credit unions and do charge higher interest rates. However, some benefits from borrowing with a bank include
- They’re FDIC backed (so are credit unions)
- They’re secure loans
- If you have a bank account with the bank, many offer discounted interest rates
Furthermore, you know you’re dealing with a reputable institution. So, you don’t have to worry about the bank going under or other issues with the financing of your small loans.
Avoid Predatory Loan Lenders
What you don’t want to do is panic. Don’t run to a small, payday lender. This is going to result in excessively high interest rates and horrible repayment terms. With an APR of nearly 400%, you can see why it’s a mistake! Avoid predatory lenders in general. If you aren’t sure, you’ll know by the huge signs which indicate
No Credit Check • Guaranteed Approval • Same day cash
Run, and avoid these schemes at all costs! If they require access to your bank account or don’t indicate an APR up front you know you’re dealing with a predatory lender, so don’t even bother filling out an application, let alone walking through the doors.
Know Your Alternatives
In some cases, a loan might be the best approach. However, the term “small” might limit your borrowing limit. If you need additional capital, you might consider
- Local nonprofits or charities, which don’t charge interest
- Government grants which you don’t have to repay (great for minorities including: women, Latin, African-American borrowers, etc.) . Lending circles or a loan grant
- A pawnshop loan, which is backed by something of value you own (in which case, you know you’ll repay if you love the item)
These are interest free or low interest options available to you. And, in many cases, such as with government grants, you don’t have to repay a cent. So, make sure you utilize all of the resources available to you. Especially if you’re a small business owner, and looking to get things going from ground up.
As a borrower, you have to research your options. Doing so is the only way to ensure you receive the best terms and the amount you need when taking out a loan. It’s also the best way to avoid overpaying on interest rates for your small loans, especially when you’re trying to get back on your feet, or need funding for a project. Know your options, and be a smart borrower, with these simple tips in applying for a loan.