As you look to impact your financial future, it can be difficult to grapple with a bad credit score. However, you can find options that will help you improve your financial situation and obtain the cash you need to survive and even thrive. Take a look at what small loans for bad credit can do for you and how they work.
What is a Small Loan?
A small loan is just that — a tiny amount of money that falls outside the bounds of what traditional banks will generally loan to you. These loans are often confined to digital financial platforms like MoneyLion or come from credit card issuers, small banks and credit unions. While they may be accompanied by a credit card or represent something like a home equity loan, they are ultimately designed to enhance your credit report and raise your FICO score.
When you apply for a small loan, these figures tend to be less than $1,000, but you should remember that repayment terms affect how much you can borrow at any one time. Moreover, a small loan can have many different purposes, and you want a platform that does not force you into explaining yourself. You need cash, and that cash should be available to you in short order, irrespective of your creditworthiness.
How to Use Small Loans
When you access a personal loan, you can use it for many different purposes. First, you can use these loans to handle immediate debts or expenses, but you can also think more broadly, considering how an infusion of cash might change your life and improve your overall well-being.
Other options for using small loans include:
- Paying for children’s activities
- Paying off lingering debts
- Investing in simple products like CDs
- Investing in family activities or vacations
- Paying off old tax liabilities
- Investing in your small business
Remember, when you take out a small loan such as this, you want to make certain you’re not required to pay a security deposit because you need access to the full credit limit. The credit bureaus are not going to give you a larger bump with a security deposit, and while those deposits are required by some credit cards, they can be cumbersome.
Improving a Bad Credit Score
Can a small loan improve bad credit? Credit card companies like to promise credit improvement, but there’s more out there, especially when you want to try a new credit type here and there.
A small loan can help you work on your credit, but it will not improve your credit all on its own. Generally, small loans designed for those with bad credit aim to give you easy access to cash and generate a payment history. However, these loans report to the credit bureaus, adding positive marks to a report that may be struggling at the moment.
As you continue to work on your credit, the boost from these small loans will help pull up your credit score, especially when these debt payments may be the only positive marks you have. At the same time, you don’t want to use too many of these loans, because your credit utilization rate will continue to increase.
Other options for improving your credit may include opening new credit cards, debt consolidation, a low value auto loan, paying all your debts faithfully and diversifying your credit mix as much as possible.
MoneyLion is a digital financial platform that helps the “99% feel 100%” about their finances. The platform offers several services to that end, including:
- Mobile banking
- Cashback rewards
- Round ups
- No hidden fees
- Financial tools and tracking
- Investing and crypto accounts
- Credit builder loans
- Cash advances
Frequently Asked Questions
What is the easiest loan to get with bad credit?
The easiest loan to get with bad credit is generally a cash advance or a small personal loan from a digital financial platform like MoneyLion.
How can I borrow money instantly?
Borrowing money instantly is often simplest with platforms that do not check credit and offer cash advances or “get paid early” features.
Who should take out a small loan?
Small loans can be useful for those who need quick cash to cover bills or large purchases. Plus, small loans may be helpful for vacations that you plan to pay off quickly, school expenses, etc.