Microcredits: Everything You Need To Know

Microcredits are an alternative in times of crisis for those who can not find the money to finance their projects. In this guide prepared by BillCare we will review what they are, what are their advantages and disadvantages and, of course, how you should request them.

1. What are microcredits?

1. What are microcredits?

Micro-credits are small loans that are granted to those people who require additional help to carry out a specific project.

It is a low-level financing for people with limited economic resources and who do not have the possibility of accessing the traditional financial system.

2. How are microcredits born?

2. How are microcredits born?

The origin of microcredits goes back to the 60s, when Muhammed Zaike, known as the “banker of the poor”, created this type of social loans to help the most deprived.

3. What are its characteristics?

3. What are its characteristics?

The main characteristics of the microcredits are:

  • The microloans offer small amounts. Normally they range from 5,000 to 25,000 euros.
  • It is not necessary to have an endorsement to request them.
  • They do not charge commissions.
  • The interests are usually higher compared to other types of loans or credits.
  • The grace periods are more flexible.
  • It is not necessary to demonstrate great personal guarantees.

4. What advantages do microcredits offer?

4. What advantages do microcredits offer?

When undertaking a new project, opting for a microcredit can mean great advantages for who is encouraged with this type of product.

Among them, the most important are:

  • Low interest rates
  • Opportunity to develop a project or business.
  • Possibility of returning the amount according to the payment capacity of the debtor.

5. What are the disadvantages of microcredits?

5. What are the disadvantages of microcredits?

As with most banking products, the advantages or disadvantages that may arise depend on the needs or characteristics of the applicant.

In this sense, the main disadvantages of microcredits can be:

  • Possibility of over indebtedness.
  • Possibility of using the microcredit for a purpose other than the initial project.

6. When to apply for a microcredit?

6. When to apply for a microcredit?

There are certain important aspects when applying for a bank loan. The microcredit is usually requested on very specific occasions and by a certain group of people.

In general, this type of financing is used to develop projects related to a small existing business or to exist.

In this sense, the most common uses that are granted to microcredits are:

  • To start or start a business.
  • To cover a crisis in a company or in the autonomous activity of the applicant.
  • To leave a hurry or domestic emergency.

7. What entities offer this type of product?

7. What entities offer this type of product?

It is important to say that in Spain, in general, microcredits are not always granted by traditional financial institutions.

Today, there are different specialized companies that also market this type of products and offer quite interesting facilities for future customers.

The different entities that grant microcredits are:

  • Official Credit Institute 
  • Lines of credit of the European Investment Bank.
  • Banks
  • Specialized private entities.

8. How to get a microcredit?

8. How to get a microcredit?

Currently, the financial system has evolved and microcredits have experienced quite interesting growth

Along with this development, the new guidelines as to how to obtain this type of financing have also changed.

In this sense, there is a large number of entities that grant microcredits without the need for the plaintiff to present an endorsement or an interesting economic situation.

And, if that were not enough, the application is made entirely via Internet

9. How long can a microcredit be obtained?

9. How long can a microcredit be obtained?

Unlike a traditional loan, microcredit is granted fairly quickly.

In some cases, and thanks to the 100% online application, the plaintiff can get an answer within 15 minutes of having made the claim.