Micro personal loans are borrowed money that can be used for major purchases, debt consolidation, emergency expenses and more. These loans are paid back in monthly installments over a period of weeks or months. It may take longer, depending on your situation and your consistency in making payments.
How do you know if a microloan is right for you?
If you need a quick infusion of cash to pay for necessary expenses, an online micro loan may be a good option. Interest rates on personal micro loans are generally lower than credit cards, unless you have a very high credit score. If your credit is excellent, and you can wait a longer period of time to receive the money, you might consider a traditional personal loan. For the same rate, the advantage of the micro loan is its speed.
Of course, you should always weigh the pros and cons. After all, taking out a personal loan means going into debt, and you’ll have to be prepared to make payments on that debt for a few years. If you don’t have the monthly budget to pay the principal and interest, reconsider how much you need to borrow or how you borrow!
7 popular reasons to get a microloan
While it’s always important to carefully consider your financial situation before taking out a loan, sometimes an online micro loan is the best way to finance a major purchase or project that you can’t afford up front. Here are the seven most popular reasons to get a personal micro loan.
1. Treat yourself to a vacation
We all need a vacation!
All surveys of the Quebec population indicate the importance we place on our time off. An ordinary vacation may not cost a lot of money, but unexpected events and obligations sometimes leave us empty-handed when our vacation arrives. Whether you have an occasion to celebrate or just time to yourself: a personal micro loan can help you finance your dream vacation.
With the summer months upon us, it’s no wonder that this is one of the top reasons Canadians borrow money.
2. Urgent repairs
Microloans are often used for emergency repairs. Whether it’s your heat pump, your car or your cell phone, the expenses related to their repair are often difficult to predict. Since cell phones are everywhere in our lives, the risk of breakage is constantly increasing! Who has never dropped their cell phone and found the fateful cracks on their screen? With an online micro loan, you won’t have to wait for your next paycheck to get it fixed!
The same goes for car repairs, sometimes a few hundred dollars can be enough to keep your vehicle on the road, saving you delays or even an inability to work!
3. Debt consolidation
Debt consolidation is another one of the most common reasons to take out a micro loan online. When you apply for a loan and use it to pay off several other loans or credit cards, you consolidate all of those balances into one monthly payment. This debt consolidation makes it easy to set up a repayment schedule without getting overwhelmed.
One of the best benefits of using a personal loan to pay off your credit cards is lower interest rates. With lower rates, you can reduce the amount of interest you pay and the time it takes to pay off your debt.
Ideal for those who have a lot of high interest rate debt.
4. Alternative to a payday loan
If you need money in an emergency, using a personal micro loan instead of a payday loan can save you hundreds of dollars in interest charges. In Canada, it is normal to see interest rates above 350% for payday loans. For a micro loan, the rates are very low and are more like 20%!
Payday loans have short repayment terms, usually before your next payday, between two and four weeks. Because of this quick turnaround time, it is often difficult for borrowers to repay the loan on the due date. Borrowers are usually forced to renew the loan, which adds accrued interest to the principal. This increases the total amount of interest due. In fact, these practices are not encouraged and are even illegal in Quebec.
Micro personal loans have longer terms and generally cost the borrower much less in terms of total interest. It is an ideal solution for borrowers with bad credit who are looking to avoid predatory high interest loans.
As a general rule: Online microloans are cheaper and safer than payday loans.
5. Projects and home renovation
Homeowners can use a micro loan to improve their home or make necessary repairs, such as plumbing repairs or electrical wiring replacement.
A micro loan is well suited for people who don’t have equity in their home or who don’t want to get a line of credit or a mortgage loan Unlike these types of loans, micro loans don’t require you to use your home as collateral since they are unsecured.
6.Help pay for car parts or appliances.
If you suddenly need to buy a new washer and dryer or replace your vehicle’s transmission, but don’t have the funds, an online micro loan can provide relief.
Personal micro-loans allow you to cover small car repairs or purchase large appliances and electronics immediately, especially if you need them for regular use. Although you will have to pay interest and potential upfront fees, a micro loan can save you time and money in the long run, as you will be able to avoid using laundromats and other costly short-term solutions.
7. Support for the financing of a vehicle
A personal micro loan is not really a way to cover the cost of a car, boat, RV or even a private jet. Rather, because the amounts are smaller, micro-loans will help you reduce the initial capital and allow you to spend less up front. It is also a way to pay for a vehicle if you don’t buy it directly from the company.
For example, if you buy a used car from another consumer, a personal micro loan can allow you to purchase the car without emptying your savings account.
Convenient for people looking to buy a new vehicle and those who don’t want to use the vehicle as collateral for a car loan.
It’s better to use a personal loan than to deplete your savings or emergency funds to pay for major expenses.
The bottom line is to be careful before taking out a personal loan. There are many reasons to get a loan, make sure yours is a good one! It should only be used to cover immediate needs and to avoid jeopardizing your long-term financial well-being.