A mini loan can be the answer to many financial questions that have to be solved in the short term. More and more people are turning to this easy-to-obtain and short-term financial injection to bridge certain bottlenecks.
Has a kitchen appliance broken? Do I have to pay a rental deposit even though the money is not fully available? Or is it about financing a holiday beforehand? A mini loan can be the right answer to all these questions. But you have to consider a few things if you want to make use of such an offer. Because if you do something wrong, a mini loan can be very expensive. And it is difficult for certain people to get such a loan at all.
But let’s take a look at what exactly needs to be considered when it comes to mini loans. Here are the advantages and disadvantages of a mini loan in a nutshell.
Advantages and disadvantages of a mini loan
You have to consider all possible aspects of a mini loan. Weighing the pros and cons is the most important thing. Only then can you decide whether a mini loan makes sense for your own situation or not.
Advantages of a mini loan
- Even the
smallest amounts available A mini loan starts from sums up to 500 euros. Thus, it can be the ideal solution if you want to replace a broken kitchen appliance, for example, or to finance a short vacation.
- manageable credit line
Small amounts that you get with such a loan are easy to grasp and therefore easy to plan in the repayment. So the risk of losing control is low.
- Plannable financial burden
Small sums for mini loans below EUR 4,000 can be calculated perfectly even in a short period of time.
- also available for financially weak consumers
Even if you have a low income and no reserves, you have the chance of a mini loan. This makes it an exciting financial aid even for low-income groups.
Disadvantages of a mini loan
- High interest rates, the most expensive
loan compared to other credit cards , such as those granted for the purchase of a car or a property, are significantly cheaper overall. This is due to the fact that the term is significantly longer and the overall loan costs are relatively lower.
Surcharges for quick payouts With mini-loans, you have to consider that a particularly quick payout, for example within a few days, costs more. So those who are urgently dependent on money generally have a disadvantage.
- Surcharges for extended repayment periods
It is particularly disadvantageous to be in arrears with the repayment of a mini loan. Here you have to expect very high additional fees.
- Entry into debt
trap possible With mini-credit you have to keep in mind that the loan amount is often very small. This leads to the fact that these debts are not taken seriously. In the worst case, such a misjudgment can be the start of the debt trap.
- not many providers on the market
Mini loans are not available everywhere. As a result, there are often only a few opportunities to obtain comparative offers.
- No special conditions possible
As a regular customer of a bank or, for example, if you have a particularly good Schufa Score, it is not uncommon to get better conditions with other forms of credit. This is not possible with mini loans. Because these have standard terms, which are not worth changing for the lender.
Financially weaker people have the disadvantage
A mini loan is basically an exciting opportunity for broad income brackets to raise money in the short term. And yet financially weaker people also have a certain disadvantage here. It is generally more difficult to get a mini loan if you have a low income.
The reason: lenders calculate the creditworthiness precisely, and especially with mini-loans, they have to calculate ice cold according to numbers. The bottom line is that it is much more difficult for low-income earners to get a mini loan than for the wealthy. Because the risk of default is higher for lenders.
A mini loan can become more expensive
A mini loan only makes sense as long as you are able to meet the repayment conditions. As soon as you are in arrears, it can become very expensive. In principle, the interest on mini loans is already fundamentally much higher than on loans with a long term. This is because short-term loans for banks must also be worthwhile. If you are now in default, the cost of a loan can quickly skyrocket. This is because additional fees are significantly higher in relation to the loan amount for mini loans than for conventional loans.
An example: Let us assume that the fee for the deferral of an installment is EUR 25. If this fee now has to be paid for a mini loan of EUR 500, the loan will become more expensive by five percent. If the loan amount is 50,000 euros, a deferral “only” costs 0.05 percent.
What are alternatives to mini credit
For all these reasons, you should note the following with mini credit: Only consider one if you have no other way to get the money you need differently! To give you an idea of how to get money from somewhere else, here is a list of suggestions:
- Borrow money from friends or family
- in the case of debt: ask for a delay in payment or make installment agreements
Overall, mini loans are a great tool for bridging financial bottlenecks. But they are not always the best solution. With mini loans, you also have to take into account that there are sometimes hidden costs.