Can I take out a small loan?

Can I take out a small loan?

author: Bryony Pearce

By Bryony Pearce

Having a poor credit score doesn’t always get in the way of getting a small loan…


If you’ve found yourself in a tricky spot financially, you might be in need of a small loan to tide you over. A small loan is typically anywhere from £100 to £1000, and is usually paid back over a shorter term than other loan alternatives.

A small loan could be used for any number of things, like paying off unexpected bills or covering costly home repairs. More often than not, a small loan will most probably come in the form of a personal loan, although there are alternatives – and we’ll cover these too.

If you’re worried that having a poor credit score could hinder your ability to access a small loan, we’re here to show you that you DO have options, and those extra funds you’re hoping for could still be within reach.

Consider the different lending options

Personal loans

A personal loan is a loan that is agreed upon between yourself and the lender, and not secured to any asset you may own. Lenders take a look over your income and your credit record and make a decision on whether they think you can afford and are likely to keep up with your repayments.

A personal loan can be anything from £100 to £25,000, which could be ideal for the small loan you’re looking for. The monthly repayment amount is agreed when you take out the loan, and this should help with monthly budgeting. The loan term (how long you need to pay it back) will depend on how much you can afford to repay each month, and personal loans are paid back over anywhere between 3 and 60 months.

Secured loans

Secured loans involve the lender securing the loan they offer you to your property, and are often referred to as homeowner loans. Secured loans can range from £10,000 to £100,000, and therefore are probably a bit more than you were looking to borrow. However, a secured loan might be easier to access if you have a particularly bad credit score, as lenders have the security of your property to fall back on should you struggle to make payments on time.

Small loans for bad credit

Although lenders will look at your credit history when you apply for any kind of finance, having a less-than-perfect credit score doesn’t necessarily mean you won’t be accepted for a small loan.

However, your bad credit might mean you’re charged a higher rate of interest on a small personal loan, or perhaps you won’t be offered as much money as someone with a higher credit score. Some lenders, like Ocean, specialise in lending to customers with imperfect credit scores. We have over 20 years’ experience in successfully finding personal and secured loans to meet all types of credit histories. So, don’t feel downhearted if you’re looking for a small loan and have struggled to manage credit in the past.

It‘s really important that you consider why you’ve had difficulty in the past and don’t overstretch yourself by borrowing more than you think you’ll be able to comfortably repay. Why? Because falling behind on repayments can incur costly charges and damage your credit history further.

Alternative options

If you’re looking to borrow less, then a credit card might be a better option for you. Borrowing on a credit card is in effect like taking out a small loan, and again, how much you’ll be able to borrow will depend on your credit history.

If you claim benefits and find yourself in a tight spot, you could apply for a budgeting loan from the government to help you make ends meet and pay for things like food, petrol, clothes or travel expenses. The smallest amount you can borrow is £100 and the loan is interest-free.

Payday loans are also an option for relatively small amounts. While they have received a swathe of bad press over the past few years due to bad practice and high-interest rates, there are now providers who will allow you to pay back the loan in several instalments, which may make it easier to manage. However, it’s worth recognising that the APR on this type of loan tends to be significantly high, so be wary of taking out a payday loan if you’re not completely confident that you can afford the high-interest costs and monthly repayments.

For some people, there might be the option to approach a family member or friend for help if you’re only after a small sum of money, as this could help you avoid any interest charges. Just work out with your friend or family member what you can afford each month and repay your debt as soon as you’re able.

Remember to be responsible

No matter how much money you’re looking for, or what you need it for, it’s important to think about how you’re going to repay it. Before you take out any line of credit, consider the interest you’ll have to pay on top of repaying what you’ve borrowed, and make sure you’re confident that you’ll be able to make your monthly repayments – even if your circumstances should change.

Making your monthly repayments on time and in full could start to boost your credit score. But equally, if you’re successful in your application for a small loan and then struggle with repayments, just remember your credit score could be impacted which could make it harder for you to access better financial products and secure credit in the future. With that in mind, it’s really important that you only borrow what you can afford.

Similarly, with a credit card, remember that you must make the minimum repayment each month or you could find yourself paying costly charges, and this could show up on your credit record.

Disclaimer: All information and links are correct at the time of publishing.

author: Bryony Pearce

By Bryony Pearce

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Can I take out a small loan? Can I take out a small loan?