Certain circumstances or temporary financial constraints mean that consumers need money in the short term. Most of these are unforeseen expenses that cannot be paid with the existing reserves. With a mini loan, private individuals can remedy financial emergencies without having to use an expensive overdraft facility.
The essentials in brief:
- A mini loan is a loan with a maximum financing amount of 1,000 USD.
- The mini loan is aimed at private individuals.
- The loan is suitable for bridging short-term payment bottlenecks.
- The term of a mini loan is between six and 36 installments.
- A classic personal loan is the cheaper option for financing goods.
Mini credit: definition and explanation
There is no legal definition for a mini loan. However, this is a loan with a short term, the total amount of which is between 500 and a maximum of 1,000 USD. The loan is not earmarked and is freely available to borrowers.
The mini loan is intended to bridge short-term financial bottlenecks. As a rule, this type of loan is not used to finance an acquisition, but rather to pay unexpected expenses such as a high repair bill for the vehicle. The mini loan is also characterized by the fact that it is applied for with a very short term. Borrowers can pay back the financing amount within six months. The maximum repayment period is 36 months.
Not all banks offer mini loans
The mini loan is hardly profitable for lenders. It causes a high administrative effort and comparatively little interest income. This is why not all banks provide this form of credit. Consumers are therefore advised to take out a mini loan online. More providers are available to them over the Internet, so that they can use the Good Finance loan calculator to compare various offers, for example.
Note: Mini credit is not a micro credit
Often consumers mistakenly use the term “microcredit” for the mini loan. Basically, the forms of financing are similar, as they are loans with a low financing amount and a short term. However, microcredits are aimed at traders and entrepreneurs, while mini loans are only granted to private individuals. In addition, under certain circumstances and if necessary, the microcredit provides for a slightly higher loan amount of up to 10,000 USD.
What needs to be considered with a mini loan?
A mini loan is a special form of financing that differs in some points from the classic installment loan. Before applying, prospective borrowers should consider several factors:
In most cases, private individuals who take out a mini loan need money at short notice and as quickly as possible. For them, the loan has the advantage that most direct banks provide a quick payout. If the application is successfully accepted, the funding amount will be available on the account within a few days. Some providers even advertise that they check the loan application within minutes and transfer the mini loan to their bank account within 24 hours.
A quick payment can only be guaranteed if all the details of the borrower are correct. In addition, the provision of the loan may be delayed if the creditworthiness was rated very poorly or if there is a negative Credit Bureau entry. This does not apply to mini loans without Credit Bureau.
Since a mini loan is a comparatively low financing amount, consumers with a poor credit rating can also get the loan. Because many banks offer a mini loan “without credit rating”. This means that applicants receive the loan amount without having to provide information on their income and expenses or without taking this into account. However, most lenders require applicants to have their employer’s last three pay slips.
It is possible to get a mini loan without Credit Bureau. This means that the form of financing is also available to people who have a negative entry with the credit agency. However, in many cases, the Credit Bureau-free mini loans are associated with additional costs to compensate for the increased risk of default.
Due to the higher interest rates, consumers should, whenever possible, always choose a loan with Credit Bureau query and credit check. The mini loan without Credit Bureau is only recommended if the bank is likely to reject it when asked.
As with any loan, consumers have to pay for additional costs in the form of interest with a mini loan. Compared to the classic installment loan, the mini loan is always associated with higher interest rates. Therefore, a regular personal or small loan is always recommended for financing a TV, smartphone or travel.
The mini loan is an inexpensive alternative to the overdraft facility despite the costs. If the bank account overdraft is exceeded, customers can expect interest of up to 15 percent. For comparison: The interest expenses for a mini loan depend on the financing requirements and the term, but always fall into the single-digit range.
Good Finance Tip: Compare providers and save interest
In order to get a mini loan immediately and cheaply, private individuals should compare different providers. With the Good Finance loan calculator, consumers can check different offers and easily find a loan with low interest rates.
A mini loan has a short term of up to three years. Borrowers should choose the shortest possible repayment period to avoid high costs. Because the longer the term, the more expensive the loan.
Mini loan provider: Who offers this form of financing?
Because mini loans offer little return to lenders, the number of providers on the market is limited. Basically, consumers can choose between banks and private individuals.
Banks as lenders
Consumers can apply for the mini loan online or at their house bank. However, since only a few branch banks offer this financing, many borrowers use online providers. This also has the advantage over the house bank that different lenders can be compared with each other using the loan calculator.
Individuals as lenders
Various credit portals offer a mini loan from private. As a lender, private individuals have a decisive advantage over the banks: they can decide at their own discretion whether they want to provide the loan. This means that people with poor creditworthiness or a negative Credit Bureau entry can also receive funding. Such a loan can, however, be associated with very high interest rates.
Advantages and disadvantages of a mini loan
Although the mini loan has some disadvantages, such as the comparatively high cost, the loan form also has some advantages. Therefore, whether the conclusion of this loan is advisable always depends on the personal situation of the applicant.
|The mini loan is available immediately, at the latest within a few days.||Only a few mini loan providers, not every bank offers this form of financing|
|Financing is possible at short notice.||Mini loans usually have higher interest rates than traditional installment loans.|
|Constant rates make the financial burden predictable.||Only low financing options up to a maximum of 1,000 USD are possible.|
|Short terms from six months are possible.||The loan amount must be repaid within a short time.|
|Mini loans are also available without Credit Bureau.||There is hardly any scope for consumers such as special repayments or installments.|
|Mini loans are also given without checking the creditworthiness.|
|The mini loan is usually cheaper than an overdraft facility.|
|The loan can be taken out quickly and easily online.|
Apply for mini credit online: process
The following explains how you can apply for a mini loan online using the Good Finance loan calculator. The comparison of different loan providers is completely free of charge for customers.
Step 1: Choose the amount of funding and the term
In the first step, consumers determine their financing needs and the term. You can get a maximum of USD 1,000 with a mini loan; if you need more, you need to take out a personal loan.
Note at runtime:
For a loan, the monthly charge is calculated based on the term. The longer this is, the cheaper the rate. However, since a long term also leads to higher interest costs, borrowers should not choose a repayment that is too long.
Step 2: compare providers
As soon as all the data has been entered, an overview with various mini loan providers is available to users. You can choose the loan that best suits your needs, taking interest and conditions into account. Upon request, a credit expert is available to you by phone and helps you select a suitable provider.
Step 3: fill in and sign the loan agreement
The mini loan can be taken out online immediately. To do this, users provide their personal data and all the information the provider needs. Borrowers can electronically sign or print out the application. In the case of electronic transmission, the applicant is identified using a video identifier. Alternatively, applicants can use the Postident and have themselves identified by a Deutsche Post employee and send the application directly to the bank.
Step 4: taking out and paying off the loan
As soon as all the details have been filled in and the necessary documents have been submitted to the bank, the loan application will be processed. Depending on the provider, this process can only take a few minutes. After full verification and approval, the mini loan will be transferred to the specified bank account immediately.
Whether mini loan or personal loan, if you want to apply for a loan, you should always compare different providers. The Good Finance loan calculator gives consumers a quick and uncomplicated overview of the financing offers on the market.