Small loan comparison up to $ 5,000.
How do you get money quickly and, above all, easily – what are the options?
Who does not know it – purchase requests cost money. Not every purchase automatically comes with a sum of thousands of USD, but a few hundred USD are easily conceivable for a car repair, a vacation or something else. If you don’t have the money, you can take out a so-called small loan, but other options are also conceivable. The most common ways to get money quickly and easily are presented below.
What is a small loan?
A small loan can be taken out for a small amount. First of all, we have to clarify what is a small loan. From a legal point of view, there is no clear definition for the term small loan, but in practice it is usually a conventional installment loan with the difference that the loan amount is only between 100 and 10,000 USD.
If there is really talk of a small loan, the loan amounts usually range from 100 to 2,500 USD. The terms are usually very flexible – everything is represented from a few weeks to a maximum of 84 months. The majority of loans granted in Austria are small loans.
Not every Austrian bank offers loans with a low loan amount. That is why it is the case that some banks only grant loans from an amount of 5,000 or even 10,000 USD – loan amounts under 1,000 USD are usually almost unthinkable anyway. The reason why credit institutions rarely grant loans below USD 1,000 lies in the fact that the fixed costs for the banking institution are the same regardless of the amount of the loan and the internal effort is therefore not worthwhile for the credit institution.
From an economic perspective, this only pays off for the bank from a certain amount, since the bank has to perform some tasks in the course of lending, such as setting up a loan account, lending itself, loan management within the term and the payment of advisory staff.
However, there are banks in Austria that offer small loans. These are mostly online banks or direct banks. Such have no branches and are only represented online and do not have to face the costs of a branch bank. In connection with small loans, there are providers who, in addition to their branch business, also issue small loans online or there are also those who specialize exclusively in small loans.
The advantages of online and direct banks are easy to explain. The financing is tailored to each customer, the interest is comparatively cheap and the purpose of use as well as the terms can be designed very flexibly.
What are the requirements for taking out a small loan?
The requirements are very low compared to a conventional loan with a small loan. As usual, the age of majority of the borrower is one of the basic requirements. Furthermore, you usually have to provide proof of permanent residence in Austria and a regular income. In addition, in most cases it is also a requirement that you do not have a negative KSV entry.
What is a small loan suitable for?
There are many situations in which it is advisable to take out a small loan. These are briefly given as examples below.
- Consumer goods and urgent repairs: If something breaks on the car or in the apartment, you usually want to have it repaired as soon as possible. If you don’t have the money, you can remedy the situation by taking out a loan. But a large number of people also take out loans for consumer goods, such as furniture or technology. Here, however, you should always remember that you shouldn’t live well above your means, because one thing is certain: in the end, the loan must also be repaid.
- Holidays and Christmas presents: If you would like to go on holiday once a year – or more often – and you do not want to do without this despite a possible lack of funds, you could theoretically take out a small loan to pay for your holiday. To what extent this makes sense or is advisable is a question that everyone can answer for themselves. But even with Christmas gifts, a financial injection is often used, since you usually have to spend a lot of money at once for a variety of gifts for children, parents, relatives and friends.
- Debt rescheduling
Is a small loan really as cheap as it is advertised?
This is a question that cannot be answered across the board. Small loans are often very cheap, especially if they do not exceed 1,000 USD. With such a small amount, the term is usually very short, which means that the borrower does not have to pay high interest rates. If you consider a small loan in comparison to a conventional installment loan with regard to the effective annual interest rate, then the small loan is higher.
Small credit is not the same as microcredit
Another distinction in terms must be made between the small loan just mentioned and the micro loan. Both of these types of credit have in common that the loan amount is low in both cases. The basic difference of microcredit is that it is mainly granted in developing countries. The aim of this form of credit is to boost the economy.
The overdraft framework and its advantages and disadvantages
If you often experience a shortage of money, it can quickly happen that the current account is overdrawn. Basically, this is automatically set on the account up to a certain amount. If you overdraw the account for a few days or a week or two, this possibility of bridging your own money shortage is not a problem.
However, if the account is in the red for several months, it can be very expensive. Even if we are currently in a low-interest phase, the interest on the overdraft of the account is 7 to 14%. The fact is, it is cheaper to take out a small loan than to overdraw your current account.
What is Cream Bank? What Are Cream Bank’s Benefits?
Cream Bank is an online small loan provider. The characteristics of the company are, for example, that processing or applying for the money is very quick and easy. It is possible to apply for up to 1,500 USD as a small loan in just five minutes. First time customers can only take out a loan of up to 600 USD, once this has been paid off, you can take out more money than credit. The terms generally run from 10 to 60 days – KSV entries are not checked here.
Here are a few examples:
- As a first-time customer you want to take up 600 USD and pay it back after 30 days. At borrowing rates of 7.95%, the repayment rate is 603.78 USD. As you can see, this means that it is not associated with high costs in order to bridge a liquidity shortage in the short term.
- If you choose a 60-day term for the same amount, the costs amount to 704.68 USD.
With just a few clicks, the data can be entered or an account created and the application completed. The application will be processed within three days and, if the decision is positive, it will take another four working days for the money to reach the account.
Basically, borrowing from a sum of 600 USD for first-time customers and up to 1,500 USD for existing customers is relatively quick and uncomplicated, and above all without questions about the purpose of use and the like. Cream Bank thus represents a real alternative to the conventional small loan at branch banks / online banks and has already convinced a large number of customers with their offer in the past.
An alternative to Cream Bank – the installment loan / installment purchase
Especially around Christmas time, many consumers finance their gifts with a loan. Nowadays it is possible to finance the purchase of jewelry, smartphones, electronics and furniture with credit. Many companies also advertise payment in installments for their products. This usually appears at first glance after a financial relief, since you can pay off one or the other product on a monthly basis.
However, you should recalculate carefully, because buying in installments is in most cases more expensive than taking out a small loan. The trick here is that companies often advertise with the so-called borrowing rate. But if you look in the small print and look for the effective interest rate, you can see that this is usually higher than that for a small loan.
These amount to around 7 to 15 percent. Another trick that providers often use is the monthly interest rate. If you read or hear that the monthly interest is only 1.65%, for example, that doesn’t sound like a lot, but if you look at the whole year it would be a horrendous 21.7%. The only situation in which an installment loan has a real advantage over a small loan is when it comes to so-called 0% financing.
This means that from time to time, some companies offer financing for a prescribed term, without having to pay any processing fees or interest – in this case, you really only pay for the device or product that you intend to buy, only on a monthly basis.
In summary, it can be said that taking out a small loan at short notice is often better and, above all, cheaper than paying for purchased products in installments or even overdrawing your own account.