“Loans to paycheck” or “Money to paycheck is what people call microloans. Moreover, these names best describe the nature of such loans. Often, people take this fast loans for urgent or unforeseen expenses, taking into account the fact that they will be able to pay off debt in the near future. In this article we will look at the very concept of microcredit and its features, the rating of popular services, and also answer the question “is it possible to earn on microcredit?”.
Microcredit and its features
Microcredit is one of the main types of credit, which consists in issuing small loans to people who do not have access to traditional banking for various reasons.
The unequivocal advantage of such a loan is its availability and the speed of receiving funds “on hands”. If bank loans require the fulfillment of certain conditions and the provision of a number of documents, microcredits are available to most people.
Many use microloans in time to pay the bill for an apartment, training and other services, to quickly find the amount for goods or gift. Also microloans often save from unexpected expenses, for example, for treatment.
As a rule, in Ukraine, the maximum amount of microcredit ranges from 2,000 to 15,000 UAH (50 – 500 USD). for a period of 1 day and up to 1 months or a year. Of course, in each microfinance company the conditions can be very different, but the essence is the same: microloans are issued in a matter of minutes and this requires a minimum set of documents.
The main advantages and disadvantages of quick loans
One of the advantages of such loans is that they are more accessible than bank loans. If large loans require the fulfillment of certain conditions, collateral, guarantors, or the observance of specific indicators, then microcredits are available to most people. After all, a quick loan offers a simple mechanism for receiving funds.
The client does not need to collect a whole package of documents (usually only the passport number and TIN), the time to process the application takes no more than 15 minutes, and the application is accepted online and without a visit to the company’s office.
To sum up, the main advantages of microcredit are:
- rate of receipt of funds;
- minimum requirements for the borrower and the documents provided;
- many services operate around the clock, so that the client can borrow at any time of the day;
- an opportunity to get a loan in any convenient way (online or in the office, on a card or in cash, etc.).
However, in spite of such a number of advantages, there is one drawback, which, with the illiterate use of such loans, can drive a person into a deep debt trap. And the name of this shortcoming interest.
For such loans, use a daily interest rate, which means that interest is calculated daily. And if the client did not have time to repay the debt in time, he will be guaranteed an incredible penalty. Therefore, in the end, you can return the bag to such a company, much more than the one declared at check-in. The market average stated interest rate for 30 days varies between 45-55%. This means that when using a loan for a month, you will pay half the cost of the loan in the form of interest. And there many people have a question: is it possible to get such a microloan on more favorable terms? There are two solutions:
The first – is to use the services of such services for the first and only time. It is noteworthy that many companies issue a first loan at a very low interest rate to attract a client.
For example, the Moneyveo service, which is popular in Ukraine, is ready to give up to UAH 5 thousand at a rate of 0.01% per day. That is, if you take 5000 UAH for one month, in the end you will only pay 15 UAH in the form of interest.
Naturally. There are some nuances. For example, the amount of the first loan will not be higher than 3-5 thousand UAH. Secondly, it will be necessary to go through an easy verification process, provide documents and bank details. But in return, you will get a really cheap loan.
The second option is bank loans. Now the market appears more and more banking services for microcredit. And if in terms of simplicity and speed of obtaining a loan, banking institutions lose, then such offers are much more profitable in the cost of loans. For example, we can consider the first Ukrainian online bank Monobank.
You can apply for a credit card both on the Internet and at the Universal bank (parent company), as the monobank does not have its own branches. The credit limit on such a card is calculated based on your stated monthly earnings.
Most often, banks use a completely different credit policy. For example, when withdrawing credit funds in Monobank, you will pay from 1 to 4% of the amount, but the use of the loan itself will be free. The only condition for such an interest-free loan is the full or partial repayment of the debt within 60 days.
Therefore, when withdrawing the same UAH 5,000 from a card, you will pay UAH 200 in the form of interest on withdrawal. However, with timely repayment it will remain the only payment for the loan.
Best microloan services
In this article we will look at the 3 most popular Ukrainian services, which are currently leaders in the microcredit market.
To fill out an application for a loan in Moneyveo, you only need access to the Internet and customer data, and to receive funds a bank card to which money will be credited. The company accepts applications around the clock and seven days a week.
It is noteworthy that this is one of the first companies that started issuing instant loans online to Ukrainians. Thanks to customer-oriented and proprietary technological developments, Moneyveo has maintained leadership in its category for more than 4 years.
- The average time of registration of the client application is 8 minutes.
- The declared interest rate for 30 days is 49.7%.
- The first loan is up to 5000 UAH at the rate of 0.01%.
- Credit limit 15 thousand UAH. Round-the-clock work and technical support 24/7.
Over the years, the service has gained popularity and prestige among Ukrainians, who urgently need to take an online credit card. The company was able to attract a large number of customers with its business policies and way of working.
- The average declared time of registration of the client application is 10 minutes.
- The declared interest rate for 30 days is 45.0%.
- The first loan is up to 4000 UAH at the rate of 0.01%.
- Credit limit 10 thousand UAH. Round-the-clock work and technical support 24/7.
“CC LOWN” is an international financial company that provides a modern and simple online microcredit service, with which it is easy to get a loan to your bank account in the shortest possible time, no matter where you are.
The company began its activities in Ukraine in April 2016 and managed to gain a strong position in the microcredit market.
- You can get a loan without a certificate of income in the amount of 400 10,000 hryvnia for up to 29 days.
- The standard interest rate is fixed at 1.33% per day.
- The annual interest rate on the loan is 478.8%. If the loan is not paid on time, the interest rate rises to 3% / day The first loan is up to 4000 UAH at the rate of 0.01%.
- Round-the-clock work and technical support 24/7.
Is it possible to earn on loans?
Of course you can! But only on the condition that you do not take, and give loans. And for this there are two ways: to organize your own microloan company or join an existing one. And if the first option requires a large amount of funds and time (for example, to obtain a license), then the second option is available to investors with different financial capabilities.
At the moment there are enough offers on the market where you can become a member of the credit union by investing money in the authorized capital. This option can be a really good and highly profitable investment, subject to certain rules:
- You must carefully study the company.
We start by checking the license, the reality of the business and the availability of assets. First of all, the future investor needs to make sure that the firm is really engaged in issuing loans, and is not a fictitious company for a quick profit on gullible investors.
In each country there is a body regulating the activities of such organizations. Information on licenses issued is freely available and is often easily located on the official website of the regulator. The investor is required to make sure that the license indicated by the company really exists and it has been issued to this particular firm. Any differences in name, address or details should cause suspicion.
- Carefully read the contract
A very important point, as in the event of any troubles, in fact the only investor’s protection is a contract signed by him. Therefore, if you are seriously planning to invest in such a business, we recommend that you take a copy of the contract from the company and consult with a lawyer first. It is better to overpay a little at the initial stage than to risk the whole sum of investments.
- Rate the company’s business model
Microcredit is a risky business. Since there is a high probability of no return of funds from the borrower. You need to examine all aspects of how the company returns loans issued, what is its interest rate policy and how competitive is it in this industry and region.
- The process of paying interest and return on investment
The contract must clearly state on what basis and in what period interest is paid. It is also necessary to understand the whole process of withdrawing from the credit union. Since your investments will be actively used in the company’s operating activities, you need to know how long it takes to withdraw funds from the company and what procedures are needed for this.
For clarity, I propose to consider two Ukrainian services in which anyone can play the role of an investor:
Royal Standard Group
The company is engaged in mortgage lending (some analogue of the pawnshop). Investor funds come to the account of the financial company Geleksi Finance with the license of the National Financial Services Commission No. 1790 for the issuance of loans, including on the terms of a financial loan. The company lends attracted investments on credit to individuals on the security of cars or real estate at 42–90% per annum.
This type of lending is not associated with high financial risks, as in the case of non-repayment of obligations, the company covers the loan body by selling collateral. Therefore, even with an unfavorable scenario, the company makes a profit, especially due to the high degree of coverage (the company indicates that a minimum of 2 UAH is a pledge for 1 UAH of a loan).
The company is an online platform for p2p lending — when people, not banks, give loans to those who need it.
P2P lending allows you to link borrowers with lenders directly bypassing banks. Borrowers quickly receive the necessary money with a minimum of documents, and investors provide finance and earn a percentage.
The company checks the borrower’s credit history at the credit bureaus, analyzes the solvency, sociodemographic and behavioral characteristics of the borrowers, and also performs biometric photo verification and verification of the Borrower’s documents.
Each borrower is assigned a credit rating of A, B, C, D, E, F, where A is the highest credit rating with the lowest risk level, and F is the lowest credit rating with high risk level but high yield. The risk level indicates the probability of default on a loan, that is, the probability of a partial or total loss of the investment.
After registration, the investor will have access to the base of loan applications from all over Ukraine, who are waiting for financing. In the list of investments, you can view detailed information on each application: the borrower’s place of residence, marital status, what level of income, the payment load, the presence of credit history, the purpose and amount of the loan. Next, the investor is required to choose the most profitable, in his opinion, credit.
After selecting the application, you must enter the amount you wish to invest. The minimum investment amount is 500 UAH, and the maximum is limited only by the amount of a specific application.
Conclusion. In this article, we have reviewed the concepts of microcredit, and reviewed the main services operating in that area. When making loans, we strongly recommend that you carefully study the contract, as well as learn about all possible payments and interest. Moreover, remember, it is not worth much to get involved in the use of credit funds, as this can lead to dire consequences in your budget.