There are situations in which unexpected expenses arise that you have to face immediately and that come to you at a time when you do not have the money you need, such as fixing a car breakdown or buying a new washing machine.
For those occasions, there are companies that offer you to have that money almost instantly and without the need to carry out complex procedures.. It is what is known in financial jargon as mini-loans.
This product is characterized by being a type of loan for a small amount -usually ranging between 50 and 600 euros- with a very short repayment period, normally one month. The money is requested online and it is deposited into your account in just a few minutes.. Of course, the interest to be returned is usually high: around 1% daily on the amount requested.
For example, for a quick loan of 300 euros for 30 days, the total amount to be returned by the client would be about 390 euros.. In this way, interest would amount to 90 euros. For new clients, it is common in many companies that the first loan that is made is granted without interest.
“Given its interest rate and its rapid expiration, this form of financing is only recommended for clients who have to face an unforeseen expense or an emergency and are clear that they will be able to return the requested capital, plus the corresponding interest, within a period of one month”, they explain from BBVA on their website dedicated to financial education.
In this sense, from Asufin they warn that “the danger of these products arises with non-payment, something very frequent insofar as it is about credits granted many times without the due study of the client's solvency.”
Interest can rise above 14% APR
The association of financial users in Spain specifies that daily late payment interest can rise in some cases above 14% TAE (real price of interest, plus commissions).
“The multiplication of costs is enormous and represents the breeding ground for the emergence of other mechanisms such as collection companies and directly the sale or endorsement of inflated debts to other companies, generating problems of helplessness for the client,” says Asufin.
In this way, according to this organization, a loan of 300 euros, which has generated up to 105 euros of interest in one month, can rise, six months later if it is not paid, to 4,946 euros; that is to say: in just seven months it would have multiplied its cost by 16.7 times.
According to the data from Asufin's IV Barometer of Mini-credits, the cost of short-term mini-credits (7 days) has skyrocketed in the last year, going from an average APR of 70% in 2022 to almost triple -185%- in 2023. On the other hand, the average interest rate on medium-term loans (30 days) fell slightly from 3.3% to 3.2%.
What do I do if I can't return the money on time?
In the event that you cannot return the money on time, the best option is to contact the company that has granted you the mini-loan to try to find a solution. Among the existing options, you can consider extending the time to return the money (although interest will continue to be generated) or split the payment of the remaining debt.
But if the company were to close down, from HelpMyCash they recommend going to the Spanish Association of Microloans (AEMIP), an organization made up of a large number of online mini-credit companies that follow a code of good practice.
“According to this document, they must show a predisposition when it comes to finding a solution for the client who cannot pay their debt,” says the bank product comparator. “Negotiating is the most effective way to avoid the consequences of non-payment, such as appearing in delinquent files or having the microcredit lender take you to court,” he concludes.
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