Microcredit: what is it, to whom it suits and how to use it wisely

Microcredit is a form of financial support provided to individuals or small entrepreneurs for relatively small amounts and short terms. Such a service is especially popular among those who urgently need Quick money KZ — For example, to cover unforeseen expenses, payment of fixed -term bills or until the salary is received. In recent years, interest in microloans has grown significantly, especially in the conditions of an unstable economy, when access to traditional bank lending is limited. In this material, we will consider in detail what microcredit is, in which situations it can be useful, how to choose a suitable microloan and what to pay attention to the borrower.

What is microcredit

Microcredit is the provision of small amounts of money (usually from 1,000 to 100,000 rubles) for a short time (from several days to several months). Such loans are often executed online and are available even to those who cannot boast of perfect credit history or official income.

Microfinance organizations (MFIs) involved in the issuance of microloans differ from banks by a number of signs:

• less requirements for borrowers;
• higher interest rate;
• simplified registration procedure;
• Often, security or guarantee is not required.

When microloans can be useful

Although microcredites are often criticized for high cost, in a number of life situations they can provide real assistance. These are common cases when such a product can be appropriate:

Urgent unforeseen expenses

A breakdown of household appliances, the need for urgent treatment, an emergency with a car — all this may require immediate expenses. In such cases, a microloan can be a temporary solution to the nearest salaries.

Payment of debts with a threat of fines

If the delay in paying for housing and communal services, taxes or other mandatory payments may entail fines or disconnecting services, the microloan allows you to win and avoid additional expenses.

Coaching of cash gaps in individual entrepreneurs or small businesses

For individual entrepreneurs, microcredit can become a tool for closing short -term cash gaps, for example, with a delay in payment from the client or urgent purchase of goods.

Improving credit history

Some borrowers deliberately take small microloans and return them on time to increase their credit rating before the execution of a large bank loan in the future.

Features and risks of microcredit

Although the design of the microloan seems simple and fast, it is important to understand the risks associated with this:

• High interest rate. In terms of annual interest (APR), rates can reach hundreds of percent per annum. This is due to a high degree of risk for MFIs.
• Fines and penalty for delay. Untimely return of the loan leads to the calculation of penalties, which many times increases the debt.
• Psychological pressure. Some MFIs, especially unscrupulous, practice aggressive methods of debt collection.
• The risk of getting into a debt spiral. If the borrower takes new loans to repay the old ones, the debt load can quickly get out of control.

How to choose a microloan: important criteria

When choosing MFIs and a specific loan, it is important to approach the case responsibly. This is what you should pay attention to:

License and company status

Check if the MFI is included in the register of the Central Bank of the Russian Federation. Only registered organizations have the right to issue microloans.

The total cost of the loan

Evaluate not only the interest rate, but also all related commissions and payments. Some organizations mask the high cost of “zero interest”, adding paid “options”.

Conditions of early repayment

Conscientious MFIs allow you to return the money ahead of schedule without fines and with the recalculation of interest. This is important if you hope to repay the loan ahead of schedule.

Transparent conditions

Before signing the contract, be sure to study all the documentation. Carefully read the contract and, if necessary, consult a lawyer.

Reputation of MFIs

Read customer reviews, check the availability of complaints on the Internet, pay attention to mention in the media and ratings.

Tips to borrowers: how to take a microloan and not regret

Soberly assess the need for a loan

Before applying, think: is it possible to do without a loan? Perhaps there is an alternative — to take from friends, agree on a deferred payment or postpone a purchase.

Calculate the debt load

The total volume of monthly loan obligations should not exceed 30–40% of your income. Consider possible delays, force majeure and delays in payments.

Choose a short time

The shorter the loan term, the less the total overpayment. At the same time, it is important to choose the deadline for which you really can return the money.

Learn the possibility of prolongation

If you are not sure that you can return the amount on time, make sure that the company provides the possibility of extending a loan (prolongation) on reasonable conditions.

Do not take loans to repay other debts

This is a signal about the financial crisis. Contact the credit consultant, revise the budget, try to agree on the restructuring of the debt with the main creditor.

How to calculate the load on the microloan

For the correct calculation of payments and evaluating your financial stability, use the following steps:

1. Determine the loan amount and term — For example, 10,000 rubles for 14 days.
2. Check the bet — Let’s say 1% per day. This is 14% for the entire term.
3. Calculate overpayment:
   10,000 × 14% = 1,400 rubles.
   Total to return — 11,400 rubles.
4. Compare with income: If your salary is 30,000 rubles, and after mandatory expenses there are 5,000 — then you don’t have enough funds, and such a loan is unreasonable.
5. Take into account possible commissions and paid serviceswhich are often “imposed” during registration-insurance, SMS notifications, etc.

Alternatives to microloans

If you urgently need money, but the conditions of the microloan are too burdensome, consider the alternative options:

• bank credit cards (if any) — often have a grace period;
• Overdraft on a salary card is less profitable than a credit card, but better than a microloan;
• Relatives or friends have a loan — there are no minimum risks and interest;
• Lombard — quick access to money on bail, but it is important to evaluate the value of the subject and risks;
• Social assistance or support programs — in some cases, the state or charitable organizations can help.

It is important to understand that microcrediting is not evil and not a panacea, but a financial tool that can be both useful and dangerous with illiterate use. It is suitable for solving short -term tasks, provided that a clear understanding of their financial burden, discipline in payments and attentiveness to the terms of the contract.

Use microloans as a temporary assistant, not a constant source of financing. And always read a small font — in this world it is often more important than headlines.