Borrowing Money From Microfinance App Keep This In Mind

The process of loaning as well as lending money has been made simpler by microfinancing apps. The loans(or microloans) provided are different from the conventional loan system, where a bank or credit union was involved, which used to lend money from common man to startups and companies. The system that these microfinancing platforms follow is peer-to-peer which has been gaining popularity for the past few years now. Instead of mega-institutions, microloans are generally issued by individuals or micro-lending platforms. These loans can even be issued by a single individual or distributed among numerous individuals who can put their share in the total amount. With such an easy and elusive deal come some things you must keep in mind while using these apps.

1. Credit Score is your representative:

Like on your social media handles, your posts and thoughts depict what kind of a person you are. Similarly, these platforms have a credit score, which regulates how you have performed on the app. It is an index that keeps a record of your transaction history and whether or not were you able to meet the deadlines.  A high and consistent credit score is the foundation of good credit history. A score ranging between 300-900 is considered consistent, plus any score above 750 is considered ideal. Maintaining this score is very easy, and can be done by simplifying clearing your dues before they hit the deadlines.

2. Comparing interest rates:

This is one of the highly important steps, as it can help you choose better deals that match your expectations. A comparison in the interest rates even results in a better credit score, as you have your financing already managed in such a way that helps you meet the ends in an easy way.

3. Check on different costs:

Before grabbing a loan, check all the costs that come while going through the whole process. It will include numerous costs such as processing charges, prepayment fees, and late payment fees. Along with interest, compare these costs and go with the one which is viable for you.

4. Your loan repayment ability:

It is very necessary to prepare yourself to return the borrowed amount even before getting a loan. For this, a highly used and common method could be directing the interest from your investments to the EMI payments of your loan. You should make sure that the amount you will have to pay every month or quarter can easily be extracted from your balance, without any difficulty in your day-to-day life.

5. Need Evaluation:

One of the factors you must keep in mind while getting a loan is your need to get a loan. There would be several loan offers that may entice you to immediately get it but you must keep your need at the centre while judging them. You can decide which loan amount suits you depending on the expenses and costs matching your financial needs.