Can a small or large loan pay off best?
When you are considering taking a quick loan, you may be considering, in the same vein, whether to borrow only the money you need here and now, or whether you need to borrow a little extra so that there is a coffin floor or other wishes and projects. But can it really pay off with a small (several small) or a large loan?
One or more loans?
Basically, it is primarily about whether you plan to take only this one loan or whether there are prospects of taking more loans in the future. Most loan providers have a fee for creating the loan, and you can save that fee by choosing one large loan rather than several smaller ones, so the fee is only paid once. On the other hand, there is no need to borrow more money and thus pay more in interest if you only have to spend a smaller amount.
You pay interest on the full amount
When you take out a loan, you pay interest on the amount you owe. That is, the interest amount typically decreases as you repay the loan. You pay interest on the residual loan. Therefore, it makes no difference in interest rates whether you take out a new loan of USD 5,000 with an interest rate of 24% or if you owe USD 5,000 of a larger loan with an interest rate of 24%.
Loans can become cheaper
What you also need to think about is whether there is a chance that you can get a cheaper loan later. Right now, competition in the loan market is fierce, and this is reflected in lower interest rates and thus cheaper loans. If you can save a lot on the interest rate later, it may be worthwhile to borrow several times. However, there are no guarantees, so it’s a bit of a rate.
Small free loans
Some loan providers offer free loans the first time you borrow from them. It is a competitive strategy to attract you as a customer, but you can easily benefit from it. However, making use of the small free loans requires that you only need USD 1,000 or 2,000, and partly that you can repay the loan within a relatively short time. Most free loans must be repaid within 30 or 60 days.