Why do financial institutions issue interest-free loans?

Even in a situation where you need an urgent loan, many people try to find the best offer with a minimum overpayment. The best solution in this case is to conclude interest-free credit transactions with microfinance organizations.

What is a 0% loan?

These loans are the most profitable for the borrower since you do not have to pay anything for using the lender’s funds. It should be noted that such transactions are profitable only in cases when the borrower clearly fulfills all its obligations and pays the lender in a timely manner.

In most cases, microfinance organizations offer such loans to citizens who first become their clients. In this way, they attract a new client, who will probably tell their relatives and even friends about such a loan program.

Microfinance organizations are forced to develop interest-free lending programs because of the great competition in this area because a large number of microfinance organizations are already registered and their number is constantly increasing, even though some of them are being deprived of their licenses and closed.

Benefits of interest-free loans for the borrower

Such loans are issued without checking credit histories, and therefore it is profitable to apply for such a loan to persons who previously had problems paying off credit debt and had negative entries in their credit history. Borrowed funds can be obtained in this way, even if at this time there is a loan that has not been closed.

Such a loan option can be called profitable because it does not have to pay for opening a credit account, wire transfer of funds, or conducting a transaction with cash, as is often the case when receiving a bank loan.

Such lenders do not require permanent registration, as long as the borrower has a passport. Transactions take place without guarantors or other security. Students and pensioners can get it, as well as people who do not have an official place of work, which is beneficial to Tutors, nannies, etc.

Secure transactions

Many are afraid to enter into transactions with microfinance organizations, as they have heard a lot of negative information about such lenders. Another reason is the high-interest rates. Today, such transactions can be called safe and relatively profitable. Now the state takes such creditors seriously. Companies must have a permit to conduct credit transactions. To get it, the lender has to agree to a relatively low-interest rate, as well as other requirements.

If a company violates the law, it loses its license and leaves the State register. The borrower also needs to check the presence of the lender in such a register before signing the contract. If such a company is not on the list, it means that its activities are illegal, and entering into a transaction with such a lender can lead to serious problems.