Small loans are loans that range from USD 1,000 to USD 2,500. These small loans are mostly used to quickly fulfill smaller wishes, such as a vacation or a new bedroom closet. You don’t always want to wait until the amount you need is saved together. Then the small loan is an ideal solution.
Period and cost
Small loans are usually repaid within a time frame of 6 to 36 months. This period is largely determined by the credit institution that issues the small loan and the negotiating skills of the borrower. If you take out a loan from your house bank, you certainly have better cards to determine the time frame yourself. The small loan generally has a cheaper annual percentage rate than an overdraft facility or the general overdraft facility. Therefore, I also offer to reschedule an expensive loan, which was used due to the current account, to a small loan.
This saved high costs. After all, this can also be a wish that you want to fulfill quickly before you let useless costs arise. For a small loan from a bank, you have to expect an interest rate of at least 3 percent up to 8 percent. Then it is important to weigh up how urgent the need is to take the short vacation or have the car repainted.
Conditions for the granting of a small loan
Not everyone can get a loan. To do this, you must at least be creditworthy. This is basically when you have no Credit bureau entries. Credit bureau is the protection association for general loan protection. It is a credit agency maintained by credit institutions that want and need to protect themselves against loan defaults. Otherwise there would soon be no one left who could grant loans. If you have no debts or the credit obligations always served on time, there are no negative Credit bureau entries.
After all, the borrower must be of legal age and have a permanent residence in Germany. In addition, loans are usually only granted to people who have permanent jobs and can also prove this to the credit institution. If you have met all of these conditions, you are considered to be fully creditworthy for a small loan in Germany. The advantage of small loans is also that the bank or Sparkasse employee will not ask why the loan was taken out. Because these small loans are private loans that are considered relatively safe. Something else applies to larger loans that serve to establish a livelihood, for which more evidence must be provided.