There are times when a person is desperate for a small amount of money, for reasons such as car repayments, mortgage, clearing a mutual debt or for other reasons where the total amount of money is only a few or grander. Now, no banking institution will grant such a small amount, but it’s harder to ask friends and family to lend that much either. This is where the concept of small loans in Australia gives the borrower the upper hand over such inconveniences and the banking systems in the country.
Most of the groups that give out small loans to desperate Aussies constitute the alternative lenders, those that are free from the regular banking allocations. And with over 8 million Aussies racking up personal loans and boosting its market, the numbers are expected to bolster the total loan value to 173 billion dollars. As such, among regular citizens and small businesses across Australia, small loans are a boon, and the advantages listed below will explain why:
- Lack of Collateral
Many lenders who give out small loans in Australia don’t usually ask for collateral. They might ask for income and transaction history for proof of payment but never anything beyond that. As such, compared to home loans or bank loans for vehicles, small loans are way easier to avail. However, interest rates might be on the higher side as lenders will always want to be on the safer side.
- Borrowers Can Use These Loans for Anything
Car loans or student loans can be used only for purchasing vehicles or paying off university fees, respectively. A house loan can only be used to pay off the initial purchase of the property, and many other loans offered by banks are to be used solely for specific purposes as stated by the bank. Borrowers cannot use the money to pay off any other services or debt, no matter the urgency. And this is where small loans shine through, as they can be used for virtually anything and has no limits on the type of payment.
Being highly versatile, individuals can use them to pay off basic expenses like mortgage, debt, purchases or maintenance costs. And although the type of spending applicable for these loans mainly depends upon the lender, there’s no doubt that it offers more flexibility compared to traditional bank loans.
- Get Loans Processed Instantly
Here’s how regular customers get their loans approved from big banks. They cite the purpose, sign over the collateral, get the writing in agreement and fill out all the important information, including banking and contact details-lots and lots of paperwork. Additionally, based on the customers standing, most of these loans will take weeks or even months to get fully processed. But in the case of small loans, although time will vary across many lenders, the standard application period is usually around a day or two, which is a better option for those who require an emergency fund for something important. Besides, small loans get rid of all the unnecessary paperwork and get the money approved quickly for those who are in a hurry.
- Rack Up the Credit Score
Small Loans are fairly easy to pay off, and customers can use this opportunity to increase their credit scores. As such, higher credit scores will allow Australia’s banking customers to avail better offers such as features for credit cards and higher limits for loan applications.
- Flexible Limits on Repayments and Interest Rates
Lenders are usually aware of the borrower’s financial status and will always tailor the lending rates according to the individual’s capabilities. Consequently, interest rates will vary from city to city, while the standard rate for cities like Sydney, which could be higher, may not be the same for cities like Warwick, which may have lower interest rates on small loans. This means, in most cases, lower-income earning groups will have more time to pay off small loans compared to high income earning customers. Moreover, flexible interest rates will also help customers pay off the loans without worrying about deadlines and missed payments.
Customers should keep in mind that the small loans availed from the lenders are well within their income capacities. And if there are missed payments, that will be reflected in the transaction history, making it difficult to get loans approved in the future. Also, before signing the documents, read through the policies and clarify all the terms and conditions.