Micro-loans are small loans granted by non-banking organizations. The small amount borrowed is intended to pay the bills or unexpected expenses. That’s why a quick microloan is only lent for a few weeks. What are the advantages and disadvantages of microloans and what to watch out for?

Plus and minus microloans

Plus and minus microloans

Like other non-bank loans, micro-loans have both advantages and disadvantages. Although clients are attracted by the speed and ease of negotiation, it should be borne in mind that in the case of a larger number of loans or repayment problems, the client can easily get into a debt trap.

Advantages of micro-loans

Micro-loans, like other non-bank loans, have a number of advantages:

  • speed of granting a loan – often within a few minutes
  • online application and negotiation
  • an SMS loan can also be obtained
  • it is not necessary to prove your income
  • they are only lent for a few weeks
  • the first loan is provided without interest, the so-called interest-free loan

Disadvantages of micro-loans

There are a number of disadvantages to micro-loans:

  • extremely high interest rate and APRC
  • after early repayment very high and numerous fees and penalties
  • an arbitration clause is often present (possible repayment difficulties would be assessed by a person designated by a non-banking organization, not by an impartial assigned auditor)
  • proof of income for higher amounts
  • need to have your own bank account

Although a loan can be an advantage to someone without proof of income, this is often not the case. Non-banking organizations expect to earn fees and possible distraint from a non-payer or a low-income client.

Often people use microloans to buy small items or gifts. Gift loans are among the more risky loans. In general, it is not worth borrowing what is not necessary.

If the applicant so often needs to lend smaller sums, an overdraft account or a credit card to a current account may be considered.

How and where to arrange a quick microloan?

How and where to arrange a quick microloan

Most microloans can be arranged online through a non-banking company website. Often, the client does not have to call or go to a branch. Negotiating online without proof of income and the debtors register is a convenient option. The speed of the loan is also determined by the fact that it is available 24 hours a day all year round.

The big advantage of micro-loans is the ability to negotiate online and have money in your account within a few hours.

In some cases, however, a quick microloan is not online before payday the only option for applicants. Some loans can be handled only over the phone, it is an SMS loan or, in the case of payment in cash, a loan at the weekend, which is even paid at the applicant’s home.

Currently several credit companies are operating in the the country, offering the first free loan for new clients.

Payment of micro loans

Payment of micro loans

Most microloans can only be redeemed by wire transfer to a bank account. It is therefore necessary to dispose of your own bank account. But not every applicant suits this option.

If the applicant needs to pay out a micro-loan on a weekend or public holiday, he / she must count on a delay in the bank transfer.

Therefore, there are also options to get money as quickly as possible on weekends and holidays. For example, the solution is a cash micro-loan immediately, which pays out in cash at various locations (eg newsagents, sales representatives at home weekend).