The credit market in the country consists of many interesting entities. These are first and foremost retail banks, which take into account effective customer monitoring principles, parabanks with flexible terms for signing loan agreements, and the social loan segment with saturation of individual investors. Loans can be divided primarily for the time of repayment. Long-term and short-term loans are characterized by similar contract structures, but ultimately they reach completely different customer groups. What is worth knowing about short-term loans in order to function safely on the credit market?
Popular views of short-term loans
A short-term loan is colloquially speaking. This is a fundamental product of non-bank institutions (parabanks). In recent years payday pay has not enjoyed much social recognition due to the excessive risk of signing the so-called usury commitment in which non-interest costs drastically exceeded the capital raised by the borrower. The situation on the short-term loan market is changing by updating legal acts, in particular the anti-usury act. In the indicated act, parabanks are enforced to apply non-interest costs to specified limits. Therefore, no adverse short-term obligations can be signed. The short-term loan is usually valid for 14, 30, 45 days. The short-term loan repayment date is one-off. This means that you raise capital and cover the entire profit of the parabank in the first installment. If you have problems with household liquidity, you usually have the chance to extend your repayment date. However, this information goes to the Credit Information Bureau database, which automatically worsens the possibility of obtaining another commitment on very good terms. After the changes in the anti-usury act, it will probably happen that the parabanks will withdraw from the extended repayment terms due to excessive risk and simply the lack of profitability of such a relief.
Lenders’ information obligations
The short-term loan agreement contains all terms of cooperation, including the presentation of debt collection costs, collateral, repayment dates, details of the borrower and the lender. The borrower in the current legal system knows everything about loans before signing the commitment, even for a short period. Limiting non-interest costs by introducing the anti-usury act is a good step to optimize the short-term loans sector, which is by far the most popular among young people with average earnings.
Is it worth using short-term debt forms?
This is definitely an opportunity to increase the efficiency of your household budget in an emergency. Short-term loans do not require large collateral or ideal creditworthiness, and this is a big plus for many people with low or medium income, however, from different, unusual sources.