When are small loans appropriate?
Larger purchases are nowadays increasingly financed by taking out loans. This is possible with an installment loan or a small loan (also mini-loan), since these are usually granted without specifying a purpose and can therefore be used both for a holiday and for new furniture or a television.
To fulfil their wishes, many borrowers do not need large loan amounts; often small loans in the amount of 500 - 5,000 euros are sufficient for financing. These loans can be taken out either online or at a local branch.
Also in retail, small loans are often offered for immediate financing of purchases. Like other installment loans, loans for small amounts are universally applicable and can be used by the borrower, if desired, to repay an existing overdraft facility. Above all, the lower interest rates compared to an overdraft or line of credit mean that small loans have become a real alternative to these types of credit.
Many consumers find it difficult to save surplus money. It is easier, however, to pay off monthly obligations, as these are usually debited directly from the account after salary is credited.
Small loans in detail
As already mentioned, small loans are usually granted in loan amounts of 500 - 5,000 euros. It should be noted that not all banks offer such small loan amounts: at MAXDA, for example, loan amounts from 1.5000,- euros are offered with an effective annual interest rate starting at 3.99%.
The borrowed amounts can then be repaid with terms of 12–84 months; in some cases banks even offer terms of up to 120 months. MAXDA goes one step further and in some cases offers the possibility to repay the loan amount within 360 months. However, it should be noted that the interest burden increases with longer terms. The agreed interest rates remain constant during this time, so the monthly instalment also remains unchanged.
Because it is possible to freely agree on the loan amount and the term, the monthly instalment can be adjusted to the borrower's needs. By lengthening the loan term, for example, it is possible to reduce the monthly instalment burden, making small loans feasible even with a rather limited budget.
However, those who take out multiple small loans risk jeopardising their positive creditworthiness due to many loans being recorded with Schufa. A Schufa inquiry will then show for a further loan that much of the borrower's available funds are already committed to loans. This can be avoided with a small loan without Schufa. Thanks to loans from Swiss banks, loans can also be taken out without Schufa inquiry and entry. MAXDA specialises in such loans. So feel free to ask us about it!
Small loans: conditions for taking out
When taking out and disbursing small loans, banks generally do not require collateral. A confirmation of regular income alone is usually sufficient to be able to use a small loan. If regular income is present, the bank can also assume that the loan will be repaid in accordance with the agreement.
An application can be made online on request. On the websites of banks and loan providers you will find loan calculators, with which both the monthly instalment and the loan term can be calculated. Afterwards, loan applicants can complete their loan application and submit it to the bank. Often small loans can then be disbursed within a few days.