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Advantages and disadvantages of acquiring a microcredit

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What is a microcredit?

Microcredits are small loans that are offered to individuals with some need, or with low resources. The purpose of the financial ones is to be able to support families to get out of an emergency.

This topic will talk about the situation that many families are going through today. The economy of our country is becoming more distressing to the point of requiring microcredits, having advantages and disadvantages at the time of obtaining them…

introduction

This essay will talk about the advantages and disadvantages that we have when acquiring a microcredit or also known as a personal loan.

"Microcredits are a variant of the traditional lending system that is intended to reach the neediest groups and without resources that cannot access financing."

Microcredits are small loans for people who are not eligible for a conventional bank loan. Their socioeconomic situation, the characteristics of the loan they need, the impossibility of providing guarantees or complying with the administrative requirements demanded by financial institutions, prevents them from accessing a loan even if they need it. The good thing is that today there are financial companies dedicated to supporting low-income employees who need to acquire a loan.

II. Background

The history of microcredit was born in India in the 1970s, thanks to Muhammad Yunus, an economics professor from Bangladesh, better known as the father of microcredit. Yunus visited a local village with the idea of ​​looking for solutions that would attack the root of the problem of poverty. There he met a woman named Sufyia, who made and sold chairs to support her family. Sufyia relied on high-interest loans from village moneylenders in order to purchase materials. Due to the stringent loan terms, there was no way for his situation to improve. Determining that Sufyia's case was not the only one, Yunus gave a loan of 856 taka, equivalent to about US $ 27, to 42 micro-entrepreneurs. Debtors not only paid off their loans promptly,rather, they managed to have more income and expand their businesses. Regarding this first experience, Yunus pointed out: "If I managed to bring happiness to so many people with so little money, why not continue with the idea?"

And so he did, thereby starting the international microcredit revolution. In 1983, Yunus founded the Grameen Bank in order to offer microcredit on a larger scale. Today, the Grameen Bank serves more than two million borrowers in more than 80,000 villages. In 2006, the remarkable global impact of microcredit earned Yunus and the Grameen Bank the Nobel Peace Prize.

III. Development

We will start this part of the document by pointing out a definition of microcredit, these are small loans that are offered to individuals with some need, or with low resources. The purpose of the financial ones is to be able to support families to get out of an emergency.

This topic will talk about the situation that many families are going through today. The economy of our country is becoming more distressing to the point of requiring microcredits, having advantages and disadvantages at the time of obtaining them.

To land the topic I will put as an example a Financier that is dedicated to making loans to collaborators of different companies. In order to satisfy their needs, it grants microcredits for an accessible term of months and at a very low interest rate, when it resorts to obtaining a microcredit, it leads us to the following:

Advantage

  1. Obtaining credit instantly. Minimum interest rate. Small amounts, greater comfort in the payment of installments. Healthy credit history. Cover the need of the collaborator. (In times of emergency such as illnesses, deaths, etc.). In the event of the death of the owner, the debt is canceled to avoid leaving this commitment to their relatives. They do not need a guarantee.

Disadvantages

  1. Minimum loan (it depends on the salary that is earned). Default interest due to late payment. Payments must be covered biweekly. In case of delay, the collaborator must pay double in their next payment.

With this analysis we realize that in some financial institutions, there are benefits when acquiring personal loans, since they have a very low interest rate and the requirements they request are minimal.

IV. Conclusions

To get a microcredit we must think about the use that we will give it, and how we will do to recover the money that was loaned, it is important to bear in mind that we cannot request a loan above our monthly income, the LFT establishes in the article 110 that you cannot authorize a loan greater than one month's salary and you cannot charge more than 30% of your earnings in excess of the minimum wage.

Microcredits are a variant of the traditional lending system that is intended to reach the neediest groups and without resources that cannot access financing.

V. References

Google.com.mx. (sf).

www.ldsjobs.org/ers/ct/articles/basics-of-microcredit?lang=spa. (sf).

Work, lf

Valda, JC (nd). https://jcvalda.wordpress.com/ventajas-y-desventajas-de-los-microcreditos/. Obtained from

Advantages and disadvantages of acquiring a microcredit