Tips & tricks to help you make the most of micro-loans
Micro-lending is a relatively new and innovative way of lending money that has taken the world by storm.
With some older and more well-established lenders and financiers disagreeing with the way micro-lending works, and in complete retrospect, the opposite opinion forming among some financial institutions and lending specialists, it can be a confusing practice – but it doesn’t have to be.
The following is a curated guide to the ins and outs, the tips and tricks, and the overall down low on micro-lending in Australia, carefully put together to give you a better understanding of this form of finance as a whole, but also how to use it to your advantage.
Where does one start?
Well, first, one should have an understanding of what a micro-lender is. Micro-lending is essentially the act of using your savings and finance to invest in other people, through allowing this finance to be lent out to various people.
Essentially, micro-lenders are businesses and people who participate in peer-to-peer lending, lending smaller, lower-risk amounts of money out to individuals at lower interest rates, removing the possibility of the crushing debt that can often come with taking out larger loans, through larger institutions.
Micro-lenders, or micro-lending websites and companies, are third-party, or middle-men, putting the man or woman on the street in touch with a person or business that will be willing to lend them the finance they need.
Why this is preferable to loans from banks?
Banks often have much lower interest rates than micro-lenders but, this isn’t always the case. Some micro lenders have good rates and great loan features that make them more convenient.
Micro-lending gives these men and women the access to smaller loans, with affordable and fair interest rates. This is easier for micro-lenders to supply you with, as without a brick-and-mortar establishment and far fewer employees than a regular bank, they can serve you much faster and with personalised service.
This is mutually beneficial, with their business being supported repeatedly by loyal customers, and their customers enjoying quick, personalised and convenient finance online.
How to start using micro-lenders?
Microloans are available to small businesses and individuals alike, and qualifying for one is far less tricky than qualifying for a bank loan, although both have a similar process. Initially, you will go through a screening process where the business or website will check on your details and circumstances.
This will include a small background and credit check, by which they will decide on the size of the loan they can give you, and the feasibility of having you as a client.
This process is usually automated, where lenders have set pre-existing specifications, which, if you meet, will allow you to qualify for financial assistance. Once you meet these requirements, you’re ready to go.
Understanding the amount you have access to
Micro-lenders supply varying amounts to the public. In 2017, the average microloan was roughly $14,000, with micro-lenders supplying businesses with loans of up to $50,000. This is a substantial amount of money for anyone and, can make an enormous difference in someone’s life, be it in a personal or professional aspect.
What you do with this money is, of course, up to you, but the first trick is in the repayment process. Early repayments, and also repaying a larger amount than expected, is a good way to save money and develop a good relationship with the lender.
Making yourself an admirable client is always a positive move, meaning that some lenders and individuals will be more eager to work with you in future. Getting the lender on your side is always a plus, and can only benefit you in the future.
Repeatedly support your lender
Microloans are exactly that – small loans. The whole process was put in place to give smaller businesses and lower-income individual’s access to finance that an ordinary bank would not usually give them access to.
Once you have completed your original loan term and require finance once more, be sure to return to a similar or the same lender as before, as repeat customers and well-viewed customers can get better rates, if not benefits from using the same lender. Loyalty goes a long way in the world of finance, and it doesn’t hurt to build a strong relationship with your lender or lending institution.
Have good, honest intentions
Some lenders even require that you give a presentation of sorts, about the business you plan to start and how you plan to run it, your goals, and a bit about yourself. This is considered to be a sort of show as some micro-lenders view their practice as humanitarian, and this is to validate that the finance will be going to a worthy cause in need.
Because there is often no collateral involved in these loans, the possibility that one can default is high and can be costly for the lender. If they know their money is going to a good cause or a business/individual with noble intentions, it can ease the process and build a more trusting relationship between borrower and lender. Thus it is always important to be honest, and upfront with your lender, as it might well secure you the finance you so need.
Know more about who you’re lending from
Know a little more about the lender itself. There are a variety of micro-lenders in Australia, including Internet-Loans, Finder.com, Jacaranda Finance and many more.
Taking a peek into not only the terms and conditions of these lender’s procedures but also the ethics and goings-on of the company can be beneficial. This way you are going into this process completely aware of who you’re dealing with, what they require from you, and exactly how much you stand to gain from dealing with them as a company.
A finance firm guilty of malpractice or shady dealings is never agreeable to have one’s name attached to, and for this reason, we recommend that you always do a little background check of your own when it comes to choosing a financial provider in the form of a micro-lender.
Knowing that you’re dealing with a company or individual with not only your best interests at heart but also a clean bill of practice, so to speak, can be real peace of mind when going through this process. Knowing what they can do for you is more important than knowing what you can do for them, so to speak.
All-in-all, micro-lending can be a real benefit
Micro-lending, in reality, is a financial revolution that could help change the world of finance as we know it today. This is made possible by the forward-thinking peer-to-peer lending market, and the miracle of technology in the digital age.
There now isn’t an enormous need for traditional banks with wallet-crushing terms and conditions, not to mention the interest rates and repayments that can destroy your financial viability when seeking finance.
Taking your first steps out into the micro-lending field can be daunting at first, but most certainly not difficult, if you follow the rules and regulations. Indeed, with the right mindset and moves when using micro-lenders, you can have the lenders themselves helping you move your personal and professional projects up further than an ordinary bank could take them – and all this is just a click away.