How to know which is better, a credit or a microcredit , both are financings granted by banks. However , the credit is aimed at people who need to make use of an amount of money immediately . On the other hand, microcredits are financing specially created for that part of society that cannot access the traditional credit system, but need a loan to be able to start a microenterprise . Therefore, in this post on microcredit vs credit : advantages and disadvantages we will get you out of all the doubts you may have.
In this article I will talk about which is better if microcredit or credit , as well as the characteristics that differentiate it. We will also carry out a comparative summary of both, evaluating the advantages and disadvantages they offer to people who need to make use of this kind of financing services .
The credit is a financing that the banking entity makes to a natural or legal person. The applicant must meet a series of requirements , among which is to present a guarantee or physical guarantee , or establish a guarantor . This service is commonly offered by the bank by approving credit cards .
Another service that is part of the loan portfolio offered by a bank is microcredits . This type of financing is aimed especially for those people who need an amount of money but do not meet the requirements to access the traditional credit system. Therefore, microcredits are special financing for the self-employed and entrepreneurs who require money to create or maintain their micro-business.
Differences between microcredit and credit
Microcredit is a financing designed for people who want to start a micro-business. Credit is also a financial product only that the person has money to be used whenever he wants. When applying for the microcredit, the person will not have to prove any guarantee or guarantee , while with the credit he needs a guarantee or guarantor .
The process to request the microcredit is simpler , on the other hand to request a loan the bank requires various documentation . The amount granted in microcredits is small, while in loans the person will have a higher amount. In microcredits the interest rates are lower , in loans the interest rate is high .
The microcredit gives you the facility of not charging commissions , on the other hand, in the credits the bank establishes the amount of a commission . For the cancellation of the microcredit, the amount of installments can be established from one to thirty or more installments, while for the cancellation of the loans it must be done monthly, so they accumulate interest and the debt is doubled.
Advantages of microcredit
The main benefit that the person obtains when processing the microcredit , is that as it is requested by a person who needs to develop the idea of a microenterprise according to the trade they know how to perform, the person is motivated when planning administrative strategies and everything related to your business. This type of loan allows the inclusion of the family to get involved in the microenterprise, thus forming family businesses.
Another advantage of microcredit is that the interest rate is the lowest used by the bank , apart from conducting an evaluation and it is according to the income received by the applicant, that the bank will place the installments to be paid for the return of this kind of loan.
On the other hand, since it is the financial entity that supports them to start their microenterprise, the person demonstrates being responsible and compliant in the payment of fees. Therefore, one of the advantages of microcredit is that the person remains solvent with the payment of the monthly fee . This type of credit is special for people in rural areas.
Disadvantages of microcredit
The disadvantage of microcredit arises from a benefit that the person obtains by paying it off in full. Well, by reimbursing the money that the bank granted, the person is registered with a good credit reference, so they have the opportunity to access the service again . The common mistake that the person makes is that they request several microcredits in different financial entities , which causes them to go into debt and then not be able to pay them all on time.
On the other hand, another of the disadvantages originated is that at the moment that the person receives the amount of money in his account, this usually divert and use the available debit to pay for his personal expenses. In other words, they do not use it to invest in the microenterprise project, but rather waste it. In this way, you will already know how Microcredit vs Credit works and act: advantages and disadvantages .