In order to know what are the disadvantages and disadvantages to which we are exposed when applying for a microcredit, it is important to know that it is a microcredit.
A microcredit is a loan that is offered to a person who does not have the financial resources to provide an endorsement or guarantee for that microcredit, as is customary in other types of loans.
Most of the microcredits are given to people with limited resources who want to start a business, forming a micro-business or making an investment to recover the money from the microcredit and generate a return.
Create an economic independence, or carry out a short-term project that will generate the money to pay the microcredit and make a subsequent investment, using the microcredit as an impetus to improve economic income.
That is why microcredits have had a great boom today, due to the type of loan and because it is considered the beginning of projects and companies with greater strength in the future.
These microcredits are offered by some banks, also in other entities such as non-governmental organizations and cooperatives that are dedicated to helping people who want to have economic independence and have no way of executing their productive project.
The objective of the microcredit is to promote, create a stable financial network for the inhabitants of a community and thus create an economic and fluid sustainability of that community.
Likewise, the entities that provide this service benefit when the acquirers do not comply with the established payment quotas.
Thus generating interest as a result of non-compliance with the agreements that must then be paid to said entity, sometimes doubling the value of the microcredit that was given at the beginning.
Advantages of a microcredit
The advantages of microcredits are many, however as well as it has many advantages as well as disadvantages, and that it will depend on each acquirer to take advantage of the borrowed microcredit in a positive way.
It is a question of personal decisions, of requesting the money with a purpose already established to avoid the overthrow, also that the investment made of the planned results, in short, there are many factors that can influence.
Therefore, we leave you the main advantages and disadvantages that can be faced when applying for a microcredit
- Finance specific projects that do not require higher economic costs.
- Solving liquidity problems, due to the speed and simplicity of obtaining a microcredit, is beneficial for solving financial problems, and in the same way continue with the execution of projects.
- For the return or payment of the microcredit, there are not too many demands that are made since there are several options and at the convenience of the acquirer it will be determined if the payment will be made in installments and the number of installments.
- It does not require endorsements or guarantees for the acquisition of the microcredit, so it is a personal commitment that the person acquires, without the need to commit a third person as guarantor.
- Due to the large number of requirements that banks ask for to acquire a regular loan, microcredits are remarkably advantageous when it comes to not having these requirements.
- The interest rate with which the microcredits are handled is much lower than the interest rates for regular loans.
- The money is immediately available, once the microcredit is requested and approved, the money will be paid through the agreed means.
- They differ in types, some for women, young people, entrepreneurs according to the group, the interested person will be cataloged and will request the microcredit according to their needs.
- More credit opportunities, reputation is important in every business, being responsible for the responsibilities acquired, if the requirements for full payment are met, in the future there will be more opportunities to request microcredits in more significant amounts.
- Microcredit helps to raise financial capacities and therefore to generate greater income, both for business growth and for the personal and family sphere.
- It motivates people to be leaders, to start their own businesses, helping to be able to manage and administer in a conscious and responsible way all resources, both human and financial resources.
- Financial independence, by becoming a micro-entrepreneur, with management and investment skills for the financial development of the project undertaken.
Disadvantages of microcredits
- Over-indebtedness, which means that due to the easy acquisition of microcredits, several are requested in different entities to provide this service and an over-debt is created.
- The use of the money obtained through microcredits for personal purposes, or failing that for a purpose other than the reason why it was requested, to solve problems or debts that will not generate any profitability and that will affect the ability to pay the microcredit.
- Although it is very easy to obtain microcredits, since they are not paid, they generate interest, which is added to the initial debt, even generating the same amount of the microcredit or more, having to pay double the amount received.
- Due to the ease of obtaining microcredits, by not paying the installments or payments demanded by the carrier entity up to date, the interests increase exorbitantly since there is no asset that is responsible for that debt when it is not canceled by the receiver.
- The maximum amount that can be acquired through a microcredit is not too high, that is why it can be used for small projects, but if a larger investment is needed it would not work.
- The acquisition of different microcredits to cover the desired amount of money, due to the ease of purchasing, thus losing administrative control, not only with one financial institution but also with several.
- Acquire the microcredit to begin to have experience and support for larger loans in the future, the person should know that although the collections are few, it is an acquired responsibility.