In just the past few years, microfinance organizations have become a serious competitor to banking organizations. Today, the services of such companies are used by a large number of people, but still, there are people who are afraid of such transactions because of erroneous myths, and there are many of them walking around microfinance organizations.
Falling into debt
Many people who did not conduct micro-credit transactions themselves assume that such lenders set too high-interest rates. Not many people can cope with paying them, and therefore the borrower is doomed to accumulate debts, falling into a debt pit, which will be extremely difficult to get out of. Such credit and financial organizations enter into credit transactions for short periods, which rarely exceed 30 days. If you calculate the percentages for this period, they are not so big. The debt increases during this time are not much also because the loan amount is small.
Micro-loans are issued when there is no other option
It is not always used today to obtain a loan from an MFI only because there is a need to obtain borrowed funds. Many use the services of such companies only to correct their credit history. It is much more difficult to fix a damaged rating through a banking organization. Microfinance organizations are easier to treat clients who have previously had problems and agree to enter into transactions with them. After receiving and timely payment of several such loans, a person’s credit history is corrected, and they can again apply to bank institutions.
The bonded loan
It should be noted that no financial organization is unprofitable debts on the balance sheet, and therefore microfinance organizations always try to make concessions to clients who have difficulties. Many serious MFOs want to get regular customers, as their earnings depend on it. To do this, they can offer individual loan terms to regular borrowers, which will be very attractive.
The lender thinks only of its profit
Every financial institution acts in order to receive profits. At the same time, microfinance organizations do not forget to please their borrowers with various bonuses, promotions, and special offers. In this way, they try to show that they care about their customers. Another sign of concern for borrowers should be the possibility of remote loan processing when the client does not have to visit the office even to get borrowed money because they are transferred to the card.
Problems with collectors
Sometimes you can hear that making a loan in a microfinance organization is fraught with negative consequences, up to serious problems with collection agencies. Today, many MFIs try to solve all the problems themselves, even in particularly difficult situations. Initially, the problem customer is offered attractive terms that will help pay off their debts. Microfinance organizations only use third-party assistance in extreme cases.