The word “credit” is already familiar to all residents of civilized countries. This financial product allows you to acquire things for which you don’t have enough patience or ability to manage money. The inflation factor also leads to the fact that it will be difficult to save for a very expensive purchase, because money is constantly depreciating. Institutions providing interest loans for the population do everything to make them quick and easy. But here, as in other areas, difficulties may arise.
Where can I get a loan?
The choice of the lender depends on many factors:
- Loan amount – by no means all financial institutions are ready to immediately give an “unfamiliar” client a large amount;
- Repayment term – some institutions specialize only in short-term loans and you will not be able to borrow money for a long term;
- The presence of already open loans – in some banks, the client may receive a refusal to issue a loan for this reason;
- Availability of guarantees – certificates of income, mortgaged property or guarantors;
- Availability of all necessary documents.
For example, if you do not have proof of solvency and you need a small amount for a short period, then it makes sense to contact microlending organizations or private lenders. If you want to buy something very expensive: an apartment, a car, pay for your studies at a university, then only a bank can issue such a loan. If you have a critical situation, you urgently need money, having a bad credit history, and only a passport from the documents – then a pawn shop or private loan can be a solution. The last option is only an extreme measure.
What are the terms and conditions for loan processing
As you can see, each institution has its own terms and conditions for loan processing:
- Banks willingly give loans only in the presence of confirmed income, collateral or guarantors. At the same time, they very carefully study the “personal matter” of each potential borrower. In this regard, the percentage of approval of transactions rarely exceeds 10–15%;
- Microfinance institutions (MFIs) are much more loyal to borrowers, and therefore the percentage of approval is around 50%. But this increases the risks of the company, and it invests their part in the interest rate, making such loans somewhat more expensive. In addition, the amount and term will be small;
- Pawnshops give money to almost anyone who has a passport and a slightly valuable, easily realizable deposit (phones, tablets, computer equipment, electrical appliances, jewelry and silverware). They can refuse either if they suspect a criminal origin of the pledge, or if it is not liquidity;
- Private lenders are the most risky loan. In this industry, the highest percentage of fraudulent cases against the borrower. Although lenders are also at great risk, in connection with which they will sometimes have to return 200–300% besides the loan body itself.
As mentioned above, some lenders may not agree to a deal. For what reason can different organizations refuse credit? Read the next article to learn the answer.