How Small Unsecured Personal Loans Can Solve Big Problems

The challenge of clearing debts is a very real one for millions of Americans, especially those who have financial situations that are threatening to get out of control. But sometimes the biggest solutions are found in the smallest options, like a small unsecured personal loan. All that is needed to make this so is some careful consideration of what is needed and the best terms that can be found.Loans are usually associated with creating debt, rather than clearing it, but the right loan can lower debt. This basically depends to the interest rate that is charged and whether approval at low interest rates is secured. If so, then it is possible to make real savings. Personal loans can be used to deal with several financial situations, but here are three things worth consideration.Accessing Emergency FundsThere are two distinct concepts of emergency funds, and this is an important aspect to consider before seeking a small unsecured personal loan to handle any perceived emergency situation. The most common is where approval is required within 24 hours, which can actually cause borrowers to panic and accept terrible loan terms.For example, a payday loan is usually approved without any trouble, so long as income is shown to be sufficient to handle the single repayment. This is perfect at times when an expense needs to be paid in that same timeframe, like a final notice on a late mortgage payment. However, getting loan approval at low interest rates is trickier.Getting a small personal loan with better terms does require some effort on the part of the borrower, who will typically spend time searching the internet. However, the savings can make it worthwhile.Consolidating Existing DebtA key use of the small unsecured personal loan is to consolidate some of the existing debt that may be creating financial difficulties. A prime example is the credit card debt that can so easily be run up and yet be so difficult to repay. By taking out a small loan, this can be cleared.Of course, what makes this kind of transaction any use at all, is the fact that the loan comes with an approval at low interest rates. This means that the cost of repaying the loan is less than the cost of repaying the credit cards, thus saving money. When two or three individual debts are joined together and cleared, the benefits can double or triple.The interest rate is a crucial factor, so it is important to secure the best rate possible. Take the time to search online for the best terms, before agreeing to any personal loan contract.Not a Payday LoanAs already mentioned, many people opt for payday loans because of the ease there is in getting approval. However, these loans are always very expensive, much more so than the small unsecured personal loans that can be accessed, either as a loan or as a line of credit.The key problem with payday loans is that the interest rate can range between 25% and 45%, depending on the lender and the terms they offer. And with one repayment expected, it means that a huge amount will be taken out of a single paycheck on the agreed date. Getting loan approval at low interest rates is extremely difficult.However, a personal loan is repaid over a longer period of time, from 1 year to 5 years, and lower interest rates are charged. And if the lender is willing to offer a line of credit, rather than a loan sum, the interest is charged only on the amount of credit spent; not the full amount. This makes the deal all the more affordable.