Micro lending has become a welcome solution for those who cannot secure a loan elsewhere due to bad credit rating and irregular instalment payments. This involves small scale lending of money to people who need money for various needs including paying school fees, buying supplies and other personal or pressing needs. Micro-lending is regulated by the Micro Finance Regulatory Council (MFRC). It is much easier to secure a loan through micro-lending due to the flexible criteria; however when handled incorrectly, it can be a major source of headache!
What to do when you apply for a micro-loan
When obtaining a micro-finance loan it is important to ensure you receive a copy of the contract or loan agreement signed. Your contract will stipulate all costs and charges, including the amount borrowed, the total interest and the total amount to be repaid in terms of the loan. The contract must also document the services charges, the repayment period, the nature and amount of insurance to be paid, the name of the insurer and the number of instalments to be made. It is the borrower’s right to demand a copy of this contract and the lender is also legally bound to furnish him or her with this document.
Before choosing a micro lender, another essential best practice involves comparing interest rates from different micro lenders, and to enquire how interest is calculated. You are also permitted to cancel the contract and return the money within three days, should you feel that your decision and, or the deal structure was unsound. Most borrowers aren’t aware of this exit clause. Of-course engaging a trustworthy and experienced loan facilitator will go a long way to ensuring that you avoid making a poor decision in the first instance.
What not to do
As with any agreement one must avoid signing blank documents at any cost. It is easy for people to add some clauses on the rest of the signed page, which additions can haunt the borrower in the long run. This is why screening the reputation of your lender and facilitator is so vital. With micro lending, one must also avoid borrowing more than needed. It is easier to get a micro-loan, but this is not a license for reckless borrowing and negligent spending. One must not borrow money from one lender to pay another as this will only keep one in a dangerous cycle of borrowing.
Micro-finance companies are not statutorily allowed to effect unlawful collections. All collections from debtors must be legal. They cannot for instance, tell you to leave your bank card with them or demand that you give them your PIN number. They are also not allowed to ask you to leave your ID book with them or order you to sign blank documents with them. Any violent means to collect money owed, naturally constitutes a criminal offence. One must always borrow money from micro-finance companies that are registered with MFRC to avoid illegal collections and other headaches associated with unregistered lenders.
For micro lending without the unnecessary hassle contact MBC Finance today for fast and reliable service!