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Small Loans

Where to Find Small Loans?
Banks and Credit Unions typically do not offer small loans. Small loans are usually under $1,000 to $2,000. The minimum loan offered by banks and credit unions are usually $2,000. Borrowers looking for small loans are usually looking for something under the 2 grand, but will sometimes take such a loan to get the necessary cash.

Small loans are offered by pawn brokers. Pawn brokers lend money in exchange for an item that the borrower wants to use as collateral. The pawn broker will offer about 30% to 50% of the real value of the item. The borrower will have a predetermined amount of time to pay back the loan and if the loan is not paid back, the pawn broker will sell the item to recoup the cost of the loan. Pawn brokers will often extend the loan for an additional fee in order to give the borrower more time to pay off the loan.
Pawn brokers charge interest on their loans and it is usually in excess of 20%. Even though the loans are small and the interest seems small, if you crunch the numbers, the interest rate is deceivingly high. To extend the loan, there is usual a loan extension fee in addition to the interest rate. If the borrower extends the loan to many times, the cost of the loan will surpass the value of the item pawned.
Small loans are also offered by payday loan companies. The small loans are available without credit check, making them accessible by almost everyone. The small loans are available in any amount from $100 to $1,500 and payable within 7 to 30 days. The payday loans and the companies that offer them are not regulated by the same federal regulations as banks and credit unions. There are regulations in place in some states that cap the interest rate that can be charged and the maximum amount that can be loaned. Lenders often look for ways to get around the regulations by partnering with banks that do not have a usury ceiling. The usury ceiling limits the finance charges that can be charged and protects the borrower from being gouged with exorbitant charges.
The idea of the payday loan is to offer small loans to those that have an unexpected expense and need the cash to take care of that financial obligation. The payback of the loan is timed to coincide with the borrower’s next payday. When the small loans are approved, the funds are typically electronically transferred to the borrower’s bank account. When the loan is due to be repaid, the lender electronically withdraws the funds from the borrower’s bank account unless other arrangements for payback are arranged beforehand.
Misuse of payday loans can lead to more financial hardships than they were meant to solve. If such small loans are used frequently, that might be an indication of a bigger financial problem. Payday loans are meant to be a fix for a temporary problem and not a permanent long term solution.

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