What You Need To Know About Small Loan

Introduction

A small loan, also known as a microloan, is when a borrower can need anywhere from a few hundred to a few thousand dollars. Depending on what region of the world you live in these amounts can vary. In the United States a microloan can be considered anything under $1 million, but in more impoverished nations a small loan may only be $25-$100. The history of small loans is actually quite recent since they have only been around since the latter part of the 20th century. Below is some information on the small loans and the impact that they have around the world.

What Is a Micro-Loan

A micro-loan is a small amount of money that lenders give to low income individuals looking to start a business. The advantage of these small loans is that they enable people with poor credit or no collateral to obtain financing for their business ideas. This is been said to help bring people out of poverty and raise them up to a livable wage. It is very easy to see why these loans are now seen as a good thing. The idea of giving and a small loan to someone with bad credit or no collateral was thought to be a fools idea until people showed how it could be a success.

In the United States it oftentimes takes much more starting capital to run a business. This means that a small loan we may see in the United States will be thousands of dollars instead of only hundreds that you would see in developing countries.

 

Impact on Developing Countries

In developing countries it is often hard for people to get the money that they need to start up their small business. These small loans provide them the opportunity that they need to get their business off the ground and prosper. Foundations, such as Kiva, have made it their mission to connect people from all parts of the world so they can support one another in their entrepreneurial dreams. There are many stories on the Kiva website that showcase how a small sum of money, even $25, can make a large impact on someone in the developing world. It gives them the chance to better their life and this small loan is the start.

One must keep in mind that a small loan like this was at one time nearly impossible for someone in a developing country to obtain. The rise of the Internet has made this lending opportunity possible and has helped to raise countless groups of people out of poverty.

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