Microloans are considered a quick solution for many people in Norway and beyond. The willingness of many creditors to offer this type of credit line and the speed at which it can be secured are key reasons for this. However, there are a few things to know about it.
Overall, having good information puts people in a good position to make the most of it. Furthermore, it ensures that many of its disadvantages can be avoided. This article discusses several things to know about this type of credit line, especially in the Norwegian context. So, read on to stay informed.
What is micro loan?
Technically, loans that do not exceed 20,000 Norwegian kroner are considered microloans in Norway. Furthermore, the minimum that most creditors will offer is at least one thousand Norwegian kroner. For the record, many options won’t go that low.
For example, some lenders set the minimum limit at 2000, 5000 and even 10,000 Norwegian kroner. As a result, it is difficult to give a minimum limit to this type of credit line. Whatever the case, they can be considered a borrowed amount of between 1000 – 20,000 Norwegian kroner in this Scandinavian country.
The small amount that can be secured is called micro loan. In this background, you should know that small as well as large loans are offered by many lenders in the market.
Unlike micro loans, small loans are credit lines of no more than 20,000 Norwegian kroner, but not more than 75,000 Norwegian kroner. At the end of the spectrum are larger loans which are credit lines in excess of 75,000 Norwegian kroner. The maximum amount that can be secured with these types of credit lines depends on several factors.
For example, many lenders work with credit limits for unsecured loans. As a result, borrowers cannot secure amounts exceeding 600,000 Norwegian kroner with unsecured large loans. On the other hand, the borrower’s mortgage collateral determines what can and cannot be secured with a secured loan.
micro loan lender
There are two types of lenders that offer this type of loan to eligible applicants. The first are the options that specifically offer this type of credit line. In other words, it is the only type of credit line they offer. As a result, small and especially large loans cannot be secured from such lenders.
On the other hand there are options that offer different types of consumer loans. By variety, we mean that these lenders offer micro, small as well as large loans.
However, it is worth mentioning how there are differences between the two types of lenders. Let’s examine some of these differences:
Options that specifically offer micro loans
Some things to know about these types of micro credit lenders are discussed below:
Options that specifically offer microloans are usually more expensive. For example, a good number of them may charge up to 60 percent nominal interest rate or even higher. Although this sounds outrageous, what is more shocking is that the costs do not end there.
This is because there are other expenses besides the high nominal interest rate. Overall, the effective interest rate can be as high as 100 percent or even higher.
A little respect for credit profiles
Little or no attention to the credit profile of the applicant is a major reason why these loans are usually very expensive. Ideally, the applicant’s credentials should be assessed. This valuation will then form the basis for deciding the cost and other terms and conditions of the loan.
However, most lenders in this category pay little or no attention to doing so. As a result, most borrowers are offered similar terms and conditions. It doesn’t matter how good or bad their credit profile is.
Such lenders are usually more interested in whether the applicant is adequately qualified or not. Once an applicant is deemed eligible enough, he or she gets the same terms and conditions as other lenders.
More favorable for loan applicants
This is the case stating that such lenders are usually known to offer micro loans at extremely nominal interest rates and charges. As a result, even people who are having difficulty securing a credit line due to their high credit status can get a chance with them.
The activities of many lenders in this category have been considered predatory in many quarters. For this reason, people need to be extremely careful when dealing with them.
It is noteworthy that not every lender that specifically provides microloans engages in predatory lending practices. This is despite it being quite common among many of them.
In light of this, doing your due diligence can help you identify the right type of lender in this category. Well, with the help of some platforms, it will become quite easy to choose the right lender from this category of options.
Some of these platforms have tools like loan calculators. For example, if you want to borrow loan 3000, which is the Norwegian translation for a loan of 3000 Norwegian kroner, you can enter these details and many other details. Other details that can be stipulated include repayment period and age.
You will then get options from multiple lenders based on the information provided. There is also a viable option of using the services of a brokering agent. This agent will get you multiple offers from different lenders instantly.
For the record, most people who secure micro loans get them from this category of options. However, it is worth mentioning how there are very few lenders that offer micro loans exclusively in the credit market.
Options that offer other types of loans
These options do not specifically offer microloans. They also offer other types of credit lines to qualified applicants. Some things to know about this type of lender (in the context of micro lending) include the following:
To set the record straight, microloans generally aren’t cheap. They are probably the most expensive credit lines. This is due to the desire of lenders to obtain maximum profits despite the small amount lent to borrowers.
Be that as it may, micro-credit lines from this category of lenders are usually cheaper than the other options discussed earlier. Therefore, people looking for the cheapest microloans have a better chance with this category of lenders. For example, while options that specifically offer these loans can charge up to a hundred percent effective interest rate, these may charge half that or even less.
Pay attention to credit profile
Lenders in this category are generally known to pay serious attention to the credit profile of the borrowers. In other words, they seriously examine the borrower’s credit score and financial history. This practice is important to these lenders for two reasons.
Firstly, it plays a huge role in deciding whether the applicant is eligible enough to be given the loan or not. Secondly, it plays a big role in deciding the interest rate and other terms and conditions (if the applicant is considered eligible enough to be given the loan).
Unlike the lender types discussed earlier, the options in this category do not treat every borrower the same way. This is especially true in the case of setting nominal interest rates and other fees.
Less favorable for borrowers
Many borrowers are unable to access credit lines from this category of lenders to obtain microloans. There are several reasons for this including:
- Stringent Requirements – These lenders will not turn a blind eye to some of the things that the previously discussed lenders will turn a blind eye to. This is especially true when it has to do with eligibility. As a result, many people do not qualify for microcredit lines from these lenders.
- Demands for other consumer loans – Lenders in this category do not specifically offer micro loans. The financial demands of offering small as well as large loans impact their ability to provide micro loans to so many people. The fact that it is easier for them to make profits from small and large loans is also a reason for
For both reasons, many people who want to obtain micro loans from this category of lenders cannot do so. So many of these people have to rely on options that specifically provide micro loans.
More lenders in this category offer microloans than options that exclusively offer such. However, the irony is that most people who secure these credit lines get them from options that specifically offer them.
Generally speaking, microloans are probably the most expensive credit lines. However, many people pay little or no attention to how expensive they are. This is especially due to the low security amount.
Well, you need to pay attention to this. This requires choosing the right lenders. That’s why a large portion of this article is devoted to the different types of micro loan lenders. Therefore, make good use of this information from now on.