Mini loan dangers – is a short-term loan suitable for you?On March 5, 2020 by admin
A mini loan is often taken out if an invoice is to be paid at short notice and your own financial resources are currently not sufficient. Such a short-term loan usually has a short loan term. So you should be able to repay the loan in the foreseeable future. But there are some requirements that you have to meet. In addition, the interest is significantly higher than with an installment loan. You should therefore think carefully beforehand whether you should actually take out a mini loan or rather borrow money from your friends or relatives.
What is a mini loan?
A short-term loan or mini loan is a simple way to get money quickly. However, this form of credit relates only to small sums of money, with most providers they are less than 1500 dollars.
A mini loan can also be taken out with poor creditworthiness, which makes it very attractive for many people. However, this form of loan has a short term, so the loan usually has to be repaid within one to two months. Accordingly, it is only intended for bridging weak financial phases.
Advantages and disadvantages of a mini loan
Short-term loans have both some advantages and disadvantages for the borrower.
- Processing is comparatively fast: the money is in the account after only a few days
- Even with bad credit record
- Redemption of an overdraft facility as interest is cheaper
- No upfront costs
- Higher interest rates than with a normal installment loan
- Only smaller loan amounts possible
- Short terms
- Additional options that can lead to a debt trap
The dangers of a mini loan
Compared to a normal loan, a short-term loan also involves various risks. First of all, the market in this country is still very small, which is why dubious providers are among the greatest dangers of a mini loan. Especially as a layperson, it is difficult to distinguish a reputable from a reputable provider.
The short term is also part of the dangers of a mini loan. The repayment must be made within a fixed period of time. If you fail to do this, you usually have to pay surcharges for failure to do so and may even have to take out another loan: This creates a vicious cycle. Payment in installments is often possible, but there are also fees for this.
Like any other loan provider, the credit record score is also checked for short-term loans. The creditworthiness then unfortunately later suffers from borrowing, especially if payment problems arise. You should ask yourself the question whether a mini loan is really worthwhile. However, the credit record score is important for many things, such as for a new apartment or the conclusion of sales contracts, so that the dangers of a mini loan are far-reaching.
Who is a short-term loan suitable for?
A mini loan is suitable for people who need a relatively small amount of money in a short time. It is usually concluded without a specific purpose and helps to overcome short financial bottlenecks. Such a loan can be particularly helpful for repairs or new acquisitions.
Short-term loans are aimed at private individuals who need help with everyday financing. These mostly include retirees, students and generally people who have little money or cannot get much money quickly.