Micro Loans

Pros and Cons of Micro Loans

Benefits and Harms of Microloans

Pros and Cons of Micro Loans

Many people around the world have successfully managed to use microloans to change their lives for the better.

Microloans are credit facilities given to people who do not have access to conventional loans. In case you are considering to acquire a microloan, it is only logical to learn about its benefits and harms.

Personal Micro Loans
How To Micro Loans in New Zealand

Benefits of Microloans

  • Free training and consultation: most microloan lenders offer training on financial literacy to entrepreneurs before giving microloans. These training and follow-ups empower the borrower to manage their funds better hence increasing the chances of becoming successful in their business ventures.

  • Flexibility: micro lenders interact with the small business owners at a personal level. Enabling them to understand the borrowers’ situations and can give them flexible terms to suit each unique case.

  • Re-establishing good credit: getting a microloan with bad credit is a great way to re-establish your credit. With continued commitment to repay your loan promptly the micro lender will report the payment history, and with time your credit history will look better. Once you repay a loan in full, you are eligible for more significant amounts.

  • Fixed interest rates: you can plan your finances better as the loan repayment is constant. The microloan interest rates are usually lower compared to credit card and payday loans.

Harms of Microloans

  • Limiting loan amount: Microloans are small loans meant to help in a business startup or to bridge the financial gap in your business operation. When in need of large sums of cash, microloans are unlikely to be your solution.

  • Commercialization of microloans: initially microloans were meant to help humanity eradicate poverty. But with time, people have indulged in the business as a moneymaking venture, making microloans expensive for the poor.

  • Weekly repayments: some micro lenders require borrowers to pay the instalments weekly; causing a lot of pressure on the borrower.


“Pros and Cons of Micro loans”

Understanding the implications involved in these microloans is a step closer to being empowered and making informed decisions. Hope the above pros and cons of micro loans gives you rough idea of what to expect when getting a loan. Good luck !
Sandra Files
Mirco Loans Researcher