In some cases it makes sense to finance smaller purchases with a loan. For example, if an unexpected damage occurs to your vehicle, you usually need to have it repaired immediately. When you take out a loan, you have not only obligations but also rights. You should know that if you are interested in a loan. Small loans are loans for which the loan amount is relatively small. See http://econgroupinc.net for a summary
In banking, micro-loans are consumer loans to households up to a maximum of USD 10,000. In the past, microloans of installment loans differed in that the micro-credits provided to the borrower in cash. 7] At the end of 1966, the volume of loans taken out by the credit institutions exceeded that of DEM 720.5 million by DEM 57.5 million.
Small loans today have lost most of their weight with the introduction of overdrafts in 1968, even though they pursue other economic goals (securing liquidity). A small loan is a consumer credit agreement according to 492 Civil Code, the conditions of which must be fulfilled (in particular in writing). It is a loan within the meaning of section 19 (1) no. 4 of the German Banking Act so that the institutions comply with the regulations of the lending business.
In the case of micro-credit, 6 of the Price Information Regulation requires lenders to set the effective interest rate so that borrowers can make a direct reconciliation between multiple lenders.
How much does a small loan cost?
If a due claim has to be settled or if a consumer wants to satisfy a long-held customer request, it may happen that the available balance on the current account is insufficient. Here it is advisable not to refund the shortfall on the overdraft. As a rule, interest rates between 10 and 15% are due to the excessive current account.
With a microcredit at the house bank consumers can borrow small amounts of money much cheaper: Depending on the respective house bank consumers can borrow between 500 and 5,000 USD as loans from the house bank – these small amounts of money are usually referred to as small loans. Because the consumer receives only a very small amount from the house bank in this case, the house bank calculates only relatively favorable interest rates for these loans – depending on the house bank and creditworthiness of the borrower are paid between two and seven percentage points.
In addition, microcredit is usually not provided – the borrower can spend the borrowed amount both for the purchase of new furniture, the rescheduling of an existing debt and for the settlement of the overdraft. Because these loans are usually granted only for small sums, many consumers use the microcredit for consumer financing.
Consumers who have already taken out a loan from a house bank can also experience financial difficulties. With a small loan, this financing bottleneck can be overcome despite an existing loan – if the creditworthiness of the client allows this. But who wants to recharge his credit with a microcredit, should always be aware that the house bank will check the credit bureau in a loan application.
The amount of the small loan approved by the house bank to increase the existing credit depends on the creditworthiness and income of each individual customer.