Lack of current income and savings is not an uncommon phenomenon. It often becomes a complex problem to solve. Especially if expenses and financial issues appear suddenly.
Faced with an urgent need for money, most people resort to a popular way of solving the problem:
- borrowing from loved ones;
- they ask for a loan.
Today, bank credit and loans from individuals have received another alternative, namely, payday loans. Today, some apps give small loans with interest. Such apps have become widespread over the past decade and a half. According to the Bankrate statistics data, 63% of Americans that use smartphones have at least one financial app.
Many people do not yet have a clear understanding of what they are. In addition, while actively advertising, these firms often do not disclose the mechanisms of their work. Therefore, even for those who have already experienced this type of lending, it will be helpful to learn more about them and find out how they work.
What Are Borrowing Apps?
Over 40 years ago, in Bangladesh, they started lending small amounts of money to people who were too poor to go to a bank for a loan. The further development of lending followed exactly this path — giving small loans to people who banks turned down.
The scheme of how loans work is similar to bank lending only in two ways:
- Loans, like credits, are repayable on a predetermined date.
- Loans to borrowing apps also incur interest.
- In other respects, the activity of borrowing apps has its specifics.
Borrowing apps are not banking institutions and are not subject to mandatory banking regulations. However, borrowing Apps have their laws and rules.
Loan — What Is It?
Banks have a common approach to evaluating customers. A rejection often follows at one bank due to a bad credit history at others for the same reason. There is no such trend for credit apps. They consider applications from people who have ruined their image by non-payment of loans, have no official source of income, have committed economic crimes, etc.
However, the behavior of borrowers is also recorded in the Bureau of Credit Histories. Thus, many have a chance to restore their image as conscientious payers.
Applying for a loan at the borrow money app for instant cash is more than easy; you can apply online or make an appointment by phone with a company representative.
- To get money in the borrowing app, you only need a passport. State and employment references, as well as other documentary evidence of solvency, are not required.
- Borrowing apps apply an individual approach to checking the borrower. They do not attach much importance to questionnaires and other formalities. Verification of the loan recipient is relatively quick. Personal communication plays a significant role, and visits to the borrower's house are practiced.
Borrowing apps usually lend small amounts to individuals, comparable to the average salary for a region or category of workers. Loans are generally paid back in a lump sum without a payment schedule.
Another approach would be complex because borrowing apps have very short repayment schedules. Borrowing apps most often borrow for several days to a month. Interest on loans is charged for the days of use of borrowed funds. Usually 1-2% per day.
Individuals apply for loans to Borrowing Apps. Unfortunately, borrowing Apps' work with businesses is limited to small entrepreneurs and startups who can't convince banks to lend them enough.
Another lesser-known activity of Borrowing apps is accepting deposits from individuals. The interest on such deposits is noticeably higher than bank deposits, but the insurance system does not cover them.
What Purposes Can I Borrow for with Borrowing Apps?
There are many purposes for which you can borrow. For example, you can pay for medical expenses, appliances, an emergency ticket, a loan, or other urgent fees. In many apps, it is not necessary to specify the purpose of the loan. Due to company policy, it aims to give out loans as quickly as possible and require as little as possible from the borrower.
i. Repayment Loan
The clients often come in when they need to repay their next loan payment. These can be both individuals and legal entities. Failure to make repayments on time can result in negative credit history and penalties.
ii. Buying Small and Large Home Appliances
For example, you've wanted to buy a good fridge for a long time, and you've been putting it off for a month, waiting for your salary. You are distracted by something else at the moment of its receipt, and the long-awaited purchase is delayed again. And now in this situation, let's add a discount in the store just for that product, which is good for you.
And if the deal is valid for a limited time, then again, waiting for a sting, you can miss a good opportunity. Then, you can add another goal in obtaining the benefits for the urgent purchase of household appliances because the discount may be more than the loan payment.
iii. Medical Expenses
Do not hesitate if the borrower or his relatives have something wrong with their health and need to buy medicine or go to a clinic. Then, you can borrow the missing amount of money.
iv. Paying for Tickets
If you plan to go on vacation soon, buying a train or plane ticket in advance is advisable. As with household appliances, you can often save on tickets if you do it at the right time. In addition, airlines are often cheaper if you buy them well in advance of the departure date.
To get the amount of money you need urgently, you can combine all of the above loan purposes into one. Based on this, Borrowing Apps usually do not place any restrictions on the intended use of the loan.
What Are the Alternatives to Online Loans?
Of course, it is ideal for preparing in advance for situations where money is needed urgently. For example, you need to form a financial cushion or have a small amount of money for a rainy day.
Another option is to try to borrow money from friends or family. If you don't have such an opportunity and can't do without a loan, first try to apply not to a bank but a non-targeted loan. Such loans can be issued in 30 minutes if you have an average credit history, and the terms will be more favorable for the borrower.
Another universal solution is a credit card with an extended grace period. If you use it wisely, you can not pay any interest, and sometimes you can even get cashback for transactions with the card. If none of these methods worked for you, you could turn to credit card apps.