Financial institutions that offer small loans don’t usually require any collateral for a person to qualify for these loans. A loan seeker has to fill in a loan application form for their loan request to be processed; one of the documents that have to accompany the applicant’s loan application is their pay slip. Financial institutions assess a person’s pay slip to determine whether or not the applicant has enough money going into their account to be able to pay back the small loan together with interest.
The interest rate that a bank charges for small loans determines the total amount that a person would have to pay back for the loan. Small loans are not as risky to a financial institution compared to mortgages. There are many people that earn a lot of money but are unable to qualify for loans because they have a lot of financial obligations that they have to meet each month.
Most small loans are short-term loans therefore a loan seeker is required to pay back a loan plus the interest within a short period of time. People apply for small loans when they have financial problems that need quick attention, these loan seekers ask for loans from financial institutions or their employers. There are many companies that offer small loans to the employees and then they deduct a certain amount from the employees’ wages or salaries.