In our previous article, we discussed the terms that lenders normally impose on you who want to borrow money. Here we will take a closer look at what applies to the loan itself.
Maturity and repayment
A very important part for those who are borrowing money is knowing how long the loan is valid. This has a major impact on the monthly cost. When it comes to micro-loans, there are loans ranging from 15 days up to 90 days. Often you can be a member here and control how long the term should be.
What one can say is that larger micro loans usually have a maturity of more than 30 days. 30 days which is otherwise the most common maturity. For example, if you borrow USD 10,000 in a month, it will be a very large sum to repay immediately when the entire loan is repaid directly. With a maturity of three months, there will instead be three repayment occasions, which is usually preferred even if the loan becomes more expensive overall.
Lenders should also print out how to pay the money to them. If they are going to send any avi to you by mail, this is something that can often cost you money.
Delay rate and reminder fee
At the time a loan is applied for, you obviously have every intention to repay the debt as planned. But if you forget a refund or do not have enough money to do so, it is important to know what happens. The lenders therefore write rules that apply to interest rates and reminder fees.
However, it is important to do everything possible to avoid such a thing. If the loan is not paid as planned, there is a risk of extra costs and, in the long run, that it goes to debt collection, which means additional costs.
You can always redeem a loan early if you wish. One advantage of micro-loans here is that it is almost always possible to solve them without problems in advance and this without any extra costs. But for safety’s sake, it’s best to read what lenders say about this.
You have the right of withdrawal in accordance with the Distance and Home Sales Act (2005: 59) regarding the entered into loan agreement. Then it may be that the lender also has other rules that are even better than the law which is something you can investigate.
This is probably the most important condition for those who want to borrow money of any kind. Lenders must print the prices clearly on their website. Something that you should keep an eye on is whether they have included a possible application cost or not in their total price. It is not uncommon for it to pay for SMS sent and that this is not included.
Another thing to look carefully at is how much of the cost is interest and what is just a fee. The rules say that fees may only cover the lender’s costs for lending money and if they want to make money on the loan then it should be in the form of interest. This has meant that many lenders now charge most of the cost in interest. Something that is good for you when you get a deduction of 30% of interest costs. Thus, it may be cheaper to borrow from someone who charges a large amount of interest, even if their price is higher than someone who has a large part with fees.
There are many sites online that compare prices between different lenders. We also do this and in our comparisons you can quickly get an idea of which lender is the cheapest.
Always read the rules
As I said, these articles should only be seen as an introduction to the rules that most often apply. Exact rules for different lenders can only be found directly with them. And before you borrow, always read the terms first. This is to minimize the risks of unpleasant surprises.