Everything you need to know about microloans: a guide to payday loans

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Lifehacker tells why microloans are given to almost everyone and how to borrow small amounts so as not to go broke.

What is microloan?

A microloan or microloan is practically the same loan, only a small one. And they take it for a little while. It is issued only in rubles.

Traditionally, a microloan is understood as a loan of up to 30 thousand rubles for a period of up to 30 days. This is the so-called payday loan or PDL (payday loan).

However, such a framework is not legally established. Only the maximum size of a microloan issued to individuals is regulated: it cannot exceed 1 million rubles for microfinance companies and 500 thousand for microcredit (see below how they differ).

Moreover, microloans are also issued to legal entities - but no more than 5 million rubles.

Then how do microloans differ from ordinary loans?

First of all, the interest rate - on microloans it is much higher, and this is connected with this. Regular loans are issued by banks, microloans - by microfinance organizations. These institutions have different statuses and are governed by different laws. The requirements for banks are much stricter: their activities are licensed.

In this regard, banks are more careful in choosing who to issue a loan to: they require proof of income, study credit history. MFOs, on the other hand, provide loans more willingly, including to those who will definitely be denied in banks.

The risk that the money will not return to the organization on time is high, but it is compensated for by huge percentages. In addition, it is even beneficial for microfinance organizations that the client is late in payments.

Gennady Loktev Lawyer of the European Legal Service

If the money is not returned, the creditor will be called, threatened with the court and collectors. Citizens often overpay and give back the latter, including through on-lending, which is extremely unprofitable.

Let's compare the average market values of the full cost of a consumer loan set by the Central Bank for loans with similar conditions:

Loans	Average market values of the total cost of a consumer loan	Microcredits	Average market values of the total cost of a consumer loan
Non-earmarked loan up to 30 thousand rubles for up to a year	28, 803% per annum	Unsecured microloan up to 30 thousand rubles for a period from 181 days to 365 days	144.599% per annum
Inappropriate loan from 30 to 100 thousand rubles for up to a year	16, 469% per annum	An unsecured microloan from 30 to 100 thousand rubles for a period from 181 days to 365 days	150, 868% per annum

The total cost of the loan is determined on the day of the conclusion of the contract based on how much the borrower will spend on it, taking into account the associated costs in the form of insurance and the like. The Central Bank data, like any averaged values, show only an approximate picture. But even so, the difference in terms of loans is obvious.

For example, you will take 80 thousand per year from a bank and an MFI. In the first case, you need to return a little more than 93 thousand, in the second - 200 thousand. These are rough calculations, since there are no additional introductory notes, but they are also eloquent.

It is more profitable for banks to issue long-term loans, since at low interest rates, they will almost not receive profit if they issue express loans. For MFOs, microloans are beneficial precisely because of the high interest rates on them.

That is, microfinance organizations are not related to banks?

Microfinance organizations can operate without a license. They are allowed to have a smaller authorized capital, they cannot attract deposits from the population according to the traditional scenario, and they cannot carry out most of the financial operations that are allowed to banks.

MFOs are subdivided into microfinance and microcredit companies. For the consumer, one difference is important: the former can give customers up to 1 million, the latter - up to 500 thousand rubles.

But there are other, less significant differences for the client. For example, the size of the authorized capital of a microfinance company must be at least 70 million; it can attract money from individuals who are not founders in the form of investments - but not less than 1.5 million.

All microfinance and microcredit companies are included in the register maintained by the Central Bank. He also monitors whether they comply with the rules of the law.

If microloans are such unfavorable conditions, why are they taken?

It is much easier to get them than regular bank loans. This does not require salary certificates and a decent credit history.

The bank considers the application for a loan for some time and makes a decision - to approve or refuse. In MFOs, as a rule, a loan is approved without checking the solvency and immediately - it is enough to have a passport and a desire to take out a loan.

Gennady Loktev

In general, the idea of microcredit is not so bad. This is the way out for those who urgently need money and who are ready to quickly return it back. For example, you need an expensive medicine, and your salary is only two days later. You take a microloan and return it the day after tomorrow - the overpayment, even with high interest rates, turns out to be moderate.

Microcredit is just a tool, the consequences depend on how you use it.

Problems begin when microloans are misused. Common situations are:

1. A person has nothing to pay for a mortgage, and he takes a microloan in order to take this money to the bank. As a result, he will then have to pay both the mortgage and the microloan. And the chances that he will have the funds for both contributions are sharply reduced. He won't have enough money for two payments next month. He will choose whether to deposit money for the apartment so as not to lose it, or take it to the MFI. Whatever decision he makes, the situation is already spiraling out of control, and there is a great risk that debt will snowball.
2. A person has lost his job, so he takes a microloan "for life" - he should not starve. The strategy is a failure: there is nothing to repay the debt, since no income is expected, and it is more logical to buy food with money from part-time work.
3. A person needs a large sum, but the banks refuse him. He takes out a loan from a microfinance organization, regardless of how much the loan will actually cost him.

As a result, the microloan debt is growing, and it becomes difficult at first, then impossible. Now Russians owe microfinance organizations almost 40 billion rubles. One of the main reasons for this state of affairs is the low financial literacy of the population.

And what, people themselves are to blame, but MFIs have nothing to do with it?

Microfinance organizations “help” people make bad financial decisions. Ads are often misleading, and potential customers draw the wrong conclusions.

For example, they write in large letters that loans are issued at an interest rate of 0.5%. The fact that these percentages are accrued per day, and not per year, is already reported in small print - on the one hand, the law on advertising has been observed, but on the other hand, few people will study the ad with a magnifying glass.

And in case of debt, MFOs are not ready to meet clients halfway - unlike banks, which provide the opportunity to restructure a loan or defer payments.

The goal of an MFI is to give a small amount and make a decent profit. Therefore, it is beneficial for her when due to delay, additional interest "drips". In the best case, they will offer to extend the debt repayment period, paying extra for it.

Gennady Loktev

But the people themselves sign the microloan agreement.

And the state does nothing to prevent this?

Attempts are being made to limit the amount of debt. So, at first, there were no restrictions on the growth of debt. From March 29, 2016, the overpayment of a microloan for a period of up to a year should not exceed four times the amount of the debt.

From January 1, 2017, the overpayment was limited to three times the amount of the debt. And interest on delinquencies was calculated only on the outstanding balance. But even they could not exceed the debt by more than two times. These rules apply to those who took out a microloan from January 1, 2017 to January 27, 2019.

New restrictions have been introduced for contracts in effect from January 28, 2019. For a consumer loan for up to a year, including for a microloan, the overpayment cannot exceed the loan amount by more than 2.5 times. As soon as the total debt reaches this figure, the law prohibits the calculation of interest, fines, penalties, and penalties.

If you borrowed 10 thousand, then you will have to return no more than 35 thousand.

From July 1, 2019, the limit will be equal to two times the loan amount, and from January 1, 2020, it will not be able to exceed the loan amount by more than 1.5 times. The interest rate is also limited: no more than 1.5% per day from January 28, no more than 1% - from July 1.

These restrictions do not apply for loans up to 10 thousand rubles and for a period of up to 15 days. For such loans, interest and penalties are not charged when the overpayment is 30% of the loan amount. But for delays, you can be fined by 0.1% per day from the remaining share of the debt.

That is, you can take out a loan and not rush to return it?

This is definitely not worth doing. Although the growth of debt is limited by law, the consequences of non-payment will still be there. Here's what it can be fraught with.

Bad credit history

Information about microloans is transferred to the credit bureau. If you do not return the money on time, this will be reflected in it, and you can forget about loans in banks at a low interest rate. At least 10 years after the debt is repaid, until the data is archived.

Acquaintance with the bailiffs

An MFI may try to collect debts through the courts. If the decision is made in her favor, then the bailiffs will arrest the accounts, describe and sell the property. Moreover, you will not be able to travel abroad.

Communication with collectors

Microfinance organizations actively use the services of collectors - so much so that microloan debtors were protected from intrusive calls and visits by a special law. Collectors are allowed to:

• communicate with the debtor with his consent;
• remind of the debt and talk about the consequences of non-payment;

• call the lender no more than once a day, twice a week, eight times a month;

  meet in person no more than once a week.

In reality, the requirements of the law are not always respected, and collectors often terrorize both debtors and their loved ones.

And if microloan is needed, what should you pay attention to?

Be sure to do the following:

1. Check if there is an organization where you intend to take money in the register of the Central Bank. If not, her activities are illegal.
2. Read the contract carefully - every line, printed in large and small print. Be sure to find out how much interest you will be charged per annum. Review the payment schedule to understand when and how much you need to pay. Pay attention to the cost of additional services, if any, the amount of fines and penalties, and what the MFI plans to charge them for.
3. Sign the contract only if everything is clear to you and there are no questions left.

Things to Remember

1. Microcredits are issued at very high interest rates, but almost all of them are due to their popularity.
2. You can take out a microloan if you urgently need money and are ready to repay it quickly.
3. You do not need to take a microloan if you are already in a financial hole: this will only worsen your situation.
4. If you take a microloan, read the agreement carefully.