Small payday loan – Cheap loans in the credit comparison.On October 18, 2019 by Joel Simmons
Not every trip to the nearest bank or the recommended bank by acquaintances and relatives is done with the intention of applying for large sums of credit.
Many individuals only need relatively small sums of money, which, however, can not easily be diverted from the current financial base.
It does not even have to be five or six thousand USD. Sometimes there are only 2,000 USD that are missing to replace the expensive Dispo or to pay for the car repair. The credit form attached here is the so-called small payday loan. Local banks often reject installment loans on this scale. Its argument is that the administrative costs are the same as for a larger loan, but the interest income would not cover them.
Why is the rescheduling of a credit line through a small payday loan makes sense?
Disbursements are expensive. But to take a look at what a dispo costs in comparison to a small payday loan that is rescheduled, actually costs, a glance at the following table helps. We assume that the account is on average $ 2,000.Interesting here is the shift between the years 2015 and 2016. Only with the financing of scooters and mopeds there was a decline. For used cars, the financing volume increased by around 30 percent.
small payday loan
But we have to differentiate here again. The conventional small payday loan ranges between 1,000 USD and 3,000 USD. Some time ago, however, a new product was introduced to the market – the small payday loan with a volume between 300 and 1,000 USD.
Advantage: Fast processing
Real small payday loans with no more than 1,000 USD volume are handled very quickly. Due to the low amounts, the financiers, FinTechs, usually waive collateral. In addition, the customer can lend on his first loan application only a sum of 300 USD or 500 USD. The repayment takes place, depending on the amount of the loan, within a period of between 30 and 90 days.
The interest rate
In a classic micro-loan, there are three factors in which the interest rate is based. In most cases, the interest rate is credit-dependent. Some banks supplement the credit rating by the term. The longer the repayment phase is set, the higher the interest rate will be. Since small payday loans are returned fairly quickly, this model usually uses a favorable interest rate. Finally, some institutions only set an interest rate regardless of the applicant’s creditworthiness and the duration of the loan.
But let’s get back to the small payday loans of the banks. The amount of the loan amount borne in the name of the small payday loan in most cases does not exceed 3,000 USD. Compared to big loans a small amount, which nevertheless is often needed.
The application for a small payday loan usually takes place in the same way as the application for a normal installment loan.
Crucial differences to the installment loan and peculiarities of the small payday loan
• The usually much shorter repayment term (usually 24 months), ie the period during which the loan is repaid.
• The monthly installments, which are small due to the small amount of the loan despite the short maturity.
• The often favorable lending rate (up to 4% per annum), which ensures that interest rates remain low.
A check of the personal, financial situation, the applicant must also go through a microcredit. The lending bank requires proof of income and expenses of the applicant. The bank uses this information to create a household bill. The household bill shows how high the monthly installment for a micro-loan may be. However, the basis for starting the application process is always the credit bureau information.
Credit bureau information, financial situation and the socio-economic data such as job or employer ultimately lead to credit scoring, which in turn has an impact on the interest rate.
While the petitioner can certainly influence his spending, he is helplessly exposed to the impact of socioeconomic data on his scoring. For example, this data takes into account the number of times credit has not been repaid in its street or postcode area. This colors him. The question of the applicant’s industry is not based on the curiosity of the bank, but on the likelihood of unemployment. Married and children are also features that worsen credit scoring. In this case, there is a divorce risk with alimony that jeopardizes a proper repatriation of the loan.
To put it bluntly, a gambling official without a wife and children has a better scoring than a married building colonel with two children who works twelve hours a day and has never had a cube in his hand.
Especially for smaller purchases or rescheduling of Dispos the small payday loan is the right way.
Despite the often unpopular information obligation of the applicant, he gets through a microcredit the opportunity to receive a very considerable amount of money for low interest and a short repayment period.