What is the minimum amount I can borrow on a personal loan?
One of the first questions customers ask themselves when looking for a personal loan is how much money they can borrow. But what if you only need to borrow a small amount?
It’s not uncommon for Australians to be faced with higher than expected bills and need a little help paying them or run out by a few thousand dollars of their savings goal. This is where smaller amount personal loans can help, depending on your financial situation and budget.
When it comes to the minimum amount that one can borrow, most personal lenders typically offer financing ranging from $ 5,000 to over $ 50,000. If you are looking for a smaller loan amount, there may be other financing options that are worth considering.
Let’s explore some common scenarios in which small personal loans or an alternative financing option may be suitable.
Scenario 1 – You are running out of funds for your savings goal
Whether you’re saving for a car, a vacation, or your wedding, sometimes our tight, tight budget doesn’t meet our deadlines. For people averse to debt, borrowing money can seem like a failure to save. This is where it is important to view credit as a tool that can be useful to those who manage it responsibly.
If you’re only a few thousand dollars away from your savings goal and have been saving diligently for some time, a small personal loan may be worth considering. After all, if you’ve already done the hard work of saving most of the money needed for your wedding, for example, you’ll potentially save thousands in interest by not taking out a personal loan for the full cost. Plus, your budget is already set up to make regular savings deposits, so you can just divert those funds to loan repayments for the future.
Alternatively, if you are just looking for some extra cash for a vacation, it may be worth considering a travel credit card. Not only could this give you access to a line of credit, but you can also enjoy benefits such as no overseas transaction fees or frequent flyer rewards, depending on the card issuer. credit.
Scenario 2 – You run out of money to pay your bills
Another scenario in which you might consider taking out a small personal loan is the frustrating situation of having bills that you cannot afford to pay, such as your energy and gas bills.
However, if you are having financial difficulties due to loss of income or growing debt, it may be best to consider an alternative. Adding up to your expenses by taking out a personal loan can only increase your financial stress, especially if it means paying off interest on a loan for up to five years because of an overdue bill.
Banks and utility providers are experienced at helping customers going through tough times, and 2020 has shown how far they are willing to go to give people leeway to pay their bills.
If you are unable to pay all of your bills, consider calling your supplier and asking for assistance if you have any difficulties. The provider should work with your finances and come up with a payment plan that you can afford. They can even freeze refunds for a specified period, saving you the funds needed for invoices.
- Talk to the provider about a payment plan and / or support in case of difficulties
Scenario 3 – Unforeseen medical expenses
They say they expect the unexpected and, unfortunately, this is also true of occasional medical bills. If you chip a tooth or need a root canal, for example, the cost of the repair can easily blow an average person’s budget.
If you don’t have the funds on hand and need a little financial help, unexpected medical bills may be a reason to consider taking out a small personal loan. Health insurance doesn’t always cover your medical needs, and if it does, you may need to pay a deductible. A small personal medical loan can help you pay off those unexpected costs should the worst happen.
Alternatively, some doctors and dentists offer “buy now, pay later” payments for lower medical bills. This can be a competitive option to consider if you can afford the partial payments, especially since it lowers interest charges. Plus, if you only need a few hundred dollars, it can save you from borrowing $ 5,000 or more, depending on a personal loan provider’s minimum loan amount.
Scenario 4 – Your car is damaged and an insurance payment is delayed
Another situation that can arise in which you need a smaller loan is if your car should be damaged. In the event that you have to pay for repairs, insurance companies can often be late in providing the necessary funds. The insurer may even dispute your claim, leaving you in a bind, especially if you use your vehicle for work.
This is where a small personal loan can come in handy. Not only can these funds help get your car back to working order, but if your insurance claim is successful, you have the funds ready and available to pay off the loan.
Please note that this option will involve reimbursement of interest in addition to your repair bill. It may be more financially reasonable to wait for your insurance to pay off to avoid costly interest charges.
Alternatively, you can put the cost of the repairs on your credit card if your credit limit allows it. But if you are unable to pay your balance by the end of your statement period, you will be charged interest. Interest on a credit card is on average higher than on a personal loan, so if you will still be charged interest, it’s worth keeping that in mind.