Micro loans can be a highly effective solution, especially if you do not have an emergency fund that you can turn to. Whether it is a payday loan, short-term loan, car loan, or personal loan, any form of credit can be considered a short term loan. The only requirement is that the consumer receives the loan within a short time frame.
While loans used to take days and weeks to approve, anyone can now apply for a micro on their Smartphone or computer in just seconds or minutes. Here’s everything you need to know about small scale loans.
What is a micro loan
Micro loans are the small loans that individuals issue rather than any financial institution. A single individual can offer these loans. This for of loan ncan aggregate from several individuals. Each of these individuals could have contributed a portion of the total amount.
They also see this form of loan as peer-to-peer financing and a suitable alternative to the loans from financial institutions.
How does micro loans work
You might want to know the credibility or the affordability of the micro loans. Just as every other form of loan has how they work, micro loans are not in exception. Typically, this loan has a 30-90-day repayment period. This is normally a small amount that you can lend, and repayment isn’t as high.
The main benefit of these loans is that the interest isn’t as high as what you might find with other loans. Due to the length of time you are repaying the loan and the amount that you are lending. Even if you don’t have a great credit score, this is something that you can consider. This is a loan for good and bad credit, but the interest will be higher if you are at higher risk and have a bad credit score.
What are the qualifications for micro loans
There is always a way to check whether a borrower is qualified to get a loan. This helps the lender to ensure that the loans get to the right borrower’s.
The following are the qualifications for micro loans:
- The applicants have to be 18 years old or older.
- You must also be the sole business owner. If you don’t own it alone, apply with your co-owners as co-borrowers.
- You don’t need perfect credit history to qualify for a microloan. This is because micro lenders consider your credit history considering your whole application.
- Problems like bankruptcies or recent incomplete payments will disqualify you.
What are the requirements for micro loans
To secure a loan, meet certain requirements. These requirements provide the lender basic information about you. This information will help to determine whether a lender will borrow you the loan that you need.
The following are all the requirements:
- A government Identity Card, International passport or a driver’s license.
- A proof of income or something to show cash flow in the business.
- They require financial statements such as profit-and-loss statements from established businesses.
- Purpose of the loan
- They need detailed business plans and cash-flow projections.
- The business owner will have to show his or her investment in the business. It could be evidence of cash expenditures.
- Sometimes collateral personal and business assets may get the loan.
- You may need to present a list of personal and professional references.
The best short-term loans you can apply for
There are a large number of lenders available to you when you are in need of some of the best micro loans. There are, however, some micro loan lenders that are recommended and known as the best in South Africa. Here are the best places to apply for short-term loans.
1. MPowa finance
MPowa finance is one of the most recommended and popular short-term lenders right now. Offering loans ranging from R1 000 to R5 000. The loan can be repaid within 45 days of being approved. In most cases, the payout will be made the same day when the application is approved. Normally, an application is approved within two hours of its receipt.
2. FASTA instant credit
FASTA instant credit allows you to repay the amount lent in three installments. The amount you can borrow ranges from R500 to R8000. FASTA is a great short-term loan option because they are paying the money immediately after the loan is approved. Interest rates aren’t high, depending on the amount you are lending and when you are repaying the loan.
3. Lime24 quick loan
There are four different loan amounts between 300 and 5400 you can get from them, making this loan unique. Usually, repayment takes between five and 36 days. Even though it’s a short period, there’s still not much interest. In addition to the handling fee, you will have to pay for the shipping. The payment will be made on the same day the loan is approved.
What are the advantages of micro loans
There is always an advantage to every form of loan, and micro loan is not an exception. Some of these advantages can either favour the lender in one way or the borrower in another way.
The following are the advantages of micro loans
- Borrower’s have access to the loan with no or bad credit history. Whereas, the lenders get higher interest rates because of the higher level of risk involved.
- Borrowers get the loans faster than from traditional bank loans.
- Lenders usually have many means of investment. Where they lend their money and get returns as interest.
What are the disadvantages of micro loans
Notwithstanding the advantages stated above, micro loans have disadvantages too. There are always two sides to a coin, and the case of micro loans is clear.
The following are the disadvantages :
- The interest rates of micro loans are higher than that of the traditional bank loans.
- You might risk losing your assets. Assets such as; your home, cars, business and so on if you cannot pay back the loan.
- Some micro loans have restrictions on what you can use the money for.
Micro loans have provided an alternative to the traditional bank loans. With micro loans, they make access to loans easier and faster. The only disadvantage of micro loans to consider is the higher interest rate attached to it. But if you’re looking for a quick loan to meet an urgent need, micro loan could be the best option.