People who need a financial injection have two options to turn to. They can go to the bank for a loan or explore the offer of a non-banking company. And we will focus on them today.
While some of the non-bank lenders offer terms comparable to banks, others find excessive interest rates and disadvantageous conditions. How to know which companies you should avoid in an arc?
Although the amendment to the Consumer Credit Act partially cleared the financial sector from the least fair lenders, firms remained on the market that balances their business on the edge of the law.
How? They also lend to people who would not reach a bank loan and offer them disadvantageous conditions and high-interest rates. Take a look at a few signals that should give you an imaginary red light:
Appealing but misleading passwords
From websites and other promotional materials from non-banking companies and micro-loan providers, it may seem that there is practically only one signature between the client and the loan.
Their pages are teeming with passwords that people in financial distress typically enter into search engines. And they promise that virtually everyone, including people in debt or distraint, who gets a loan through a loan and thus exacerbates their financial problems, gets a loan from them.
That a loan on your hand would rip your thorn out immediately? If you don’t want to get into a debt carousel, just forget about it and try to see if you can find a safer way to stabilize your family budget.
Opaque company structure
You wanted to know more about one of the lenders, but basically, you didn’t find anything on their website and couldn’t find relevant information elsewhere? Then look elsewhere.
Trust plays an important role in lending money, and if a business does not want to share more information about its business or services with the public, but requires sensitive information from its clients, then it is unlikely to be very trustworthy.
Every non-banking company does not necessarily have to be bad, but one who is bumpy and refuses to put cards on the table may have reasons for secrecy.
Try cutting down unnecessary expenses instead of a loan.
By default, the loan is repaid on a monthly basis. You can pay by standing order, which is the easiest way not to forget the installment, or by individual payment orders.
However, some non-banking companies require weekly repayments, which are collected by their sales representatives after hundreds of crowns directly at their clients’ homes or other agreed places.
Although this is not illegal, try to avoid these companies, as they generally target poor debtors who are at risk of not accumulating more money in a month. They then get into a debt spiral, from which often does not lead out.
TIP! Is a loan inevitable for you? We have advice on how to choose a loan that does not ruin you.
The loan can be arranged only on the Internet or by phone
Sure, you can also arrange a classic loan online, but at the same time, you have the opportunity to stop at a branch and discuss the details with a bank advisor.
Some non-banking companies, on the other hand, sometimes act as if not even real people were behind them, but rather clever robots to pay out money and send SMS and e-mails. These companies often offer, for example, so-called SMS loans or Finnish loans, which attract money to the account within 15 minutes of approval or even less.
As a rule, they do not have stone branches, and the largest part of their employees are sales agents, who often behave like usurers, with the sole task of collecting money from clients. So if you prefer personal contact when choosing and negotiating a loan, you will often be out of luck with non-bank loans and micro-loans.
An astronomical amount of interest and APR
Taxes that some non-banking companies lend to people who have failed in the bank are significantly higher interest rates and especially APR (Annual Cost Percentage Rate), a figure indicating the average cost of the loan plus all charges.
The APRC on these loans (usually up to USD 30,000) is in the order of hundreds to thousands of percent (!). By comparison, credit cards are usually in the range of 20-30%.
To get an overview of how these rates vary across companies, you can try one of the loan calculators found on the Financial Comparisons website comparing the bank and non-bank lenders to see which companies you should avoid in a snap.