Which pre-pay loans have the most fair terms?
In particular, short-term small loans, which are called microloans or pre-payday loans, are among the most demanded among credit products. They are offered by a huge number of non-bank companies, where the first free loans are popular, but a small and short-term loan can also be obtained from banks. Unfortunately, because microloans are often one of the reasons why many people are in need of indebtedness, the public benefit organization People in Need looked at their terms and conditions.
People in Need compared bank and non-bank microloans
Among other things, the comparison of the People in Need organization is interesting because we can find non-banking and banking products in one common graph. As a result, we can get a better picture of how big differences are between products and how much short-term bank loans are different from non-bank products. In some ways, the results were not surprising, but some figures are quite unexpected.
Some non-bank companies were pleasantly surprised
It turned out that even a non-bank company can offer a favorable loan that not only can fully compare to bank loans, but also surpasses them in some respects. Overall, the results confirmed that bank loans are generally cheaper, but at the same time it turned out that even non-banking companies can find truly fair and reputable companies where no one has to worry about high interest or excessive penalties for late payment.
In the case of loans for payout, the penalty for default is an important parameter
Late redemption or loan extension fees are a very important parameter for pre-pay loans – because there are many people who borrow, fail or fail to repay money in time and start accruing interest or paying for a deferred payment. In this respect, the non-bank loan Nevoli won with the lowest cost of non-repayment, while OPR Finance and the lesser-known Austi Bank placed in other places. On the other hand, the Portal loan was the worst hit, while CreditPass or LoanCount loans also had high costs.
High differences are mainly in total credit costs
Considerable differences between loans are mainly in total credit costs, which is probably the most important parameter. In this comparison, the individual products were more or less divided into two groups, with bank loans + non-bank Bankil and Nevoli being significantly cheaper, while the rest of the non-bank was considerably more expensive.
The subject of the comparison was also legal procedures, information and contractual documents
The responsible lending index also focused on other aspects of microloans – People in Need looked at the awareness of credit companies’ clients and compared the number of credit documentation pages. In terms of awareness, for example, Home Credit, Bankil or Nevoli loans were well rated in terms of number of parties, and non-bank companies, which have shorter documentation are more friendly in this respect.
The winner was the non-bank company
And how was the comparison overall? The winner of the index became a non-bank loan Nevoli, which managed to beat all bank competitors. The second was the loan from Airbank and the non-bank loan again, the one from Bankil. In other places, with the exception of Home Credit, they were all banks, while some non-bank loans ended up on the top of the list – CommeCredit came out as the worst in the index, followed by Lit Credit and Hipa Credit. You can find complete results of the Lending Index on the How to Survive website operated by People in Need.