Why small loans could be your secret weapon for smarter financial choices

Boosting your financial track record

• On-Time Repayments: Paying back small loans on time shows you can borrow and pay back money responsibly. This builds a good money management history, which is crucial for your financial profile and can lead to better opportunities.
• Various Money Products: Using different money products, like credit cards, personal loans, and mortgages, shows you can handle different money responsibilities.
• Smart Money Use: Small loans can teach you how to use money wisely, which is important for your borrowing future. Managing your money well, including loan repayments, shows good money discipline and can lead to better long-term money decisions.
• Establishing Your Financial Track Record: Small loans can help you build up a financial track record, especially if you're new to managing money. A solid financial history could open doors to opportunities like applying for a mortgage or a car loan, which may be essential steps in achieving your financial goals.
• Managing Money You Owe: Small loans can also teach you how to handle the money you owe to others. Learning to budget and manage repayments wisely is an important life skill that may protect you from money stress in the future.

Getting ready for a bright financial future

• Getting Ready for a Home Loan: When you want to buy a home, banks look at your money-handling history. Managing small loans responsibly can help you get a home loan with good terms and a low interest rate. A strong credit history can make the dream of homeownership more achievable. It can result in lower interest rates, which means paying less over the life of your mortgage.
• Having Money for Emergencies: Small loans can act like a financial safety net for unexpected things that come up. Access to a small loan in emergencies can prevent you from falling into a cycle of high-interest debt. It provides peace of mind when unexpected expenses arise.
• Learning Money Skills: Managing small loans can teach you how to be good with money. It could equip you with the knowledge to create effective money management strategies, paving the way for achieving your financial objectives.
• Saving for Unexpected Expenses: Small loans can also help you build an emergency fund. This is money you save for unexpected things like medical bills or car repairs. An emergency fund is your financial cushion. It ensures you're prepared for unexpected expenses without resorting to high-cost borrowing.

Getting better money deals

• Paying Less Interest: When your money history improves because of small loans, you can qualify for loans with lower interest rates. This means you won't pay as much extra money over time. A strong credit history can lead to lower interest rates on loans and credit cards. It reduces the overall cost of borrowing, leaving more money in your pocket.
• Bigger Loan Limits: A strong history of handling small loans well can lead to higher limits. This is helpful when you need more money for big things like buying a car or starting a business. Responsible handling of loans can increase your creditworthiness, making lenders more willing to extend higher loan limits when needed.
• Good Loan Terms: Lenders might be more willing to give you good loan terms and flexible payment options when they see you have a positive borrowing history. A positive credit history can make lenders more comfortable offering you favourable loan terms, including lower interest rates and flexible repayment options.

Using small loans wisely

• Borrow Only What You Need: Don't borrow more money than you really need. This can help you avoid money stress. Borrowing only what you need ensures you can comfortably manage repayments without possibly straining your finances.
• Always Pay on Time: Pay small loans on time to improve your payment history. This is a big part of your money record. Consistently paying on time enhances your credit history and demonstrates responsible financial behaviour.
• Shop Around: Look for the best loan terms and interest rates at different lenders. Don't just go with the first offer you get. Shopping around allows you to compare loan offers, ensuring you get the best possible terms for your financial situation.
• Don't Take Too Many Loans: Be careful about taking out too many loans at once. This can make managing your finances harder and lead to more debt than you can handle. Avoid over-stretching your finances by taking on multiple loans at the same time.

Where to Find Small Loans

• MoneySmart - Your credit report
• Australian Securities and Investments Commission (ASIC) - Building your credit history
• MoneySmart - Emergency funds
• Australian Financial Review
• Money Matters Australia