It was a matter of time before the loan market opened to new forms of borrowing money and a new type of offer offered to clients in order to attract them to a given company. After ages of proof and without BIK, the time has come for free loans, with the first part of the name sometimes being taken with a grain of salt.
Free, or what?
When it comes to the free of charge of a service, the rules are usually clear – the client does not incur any fees. For cash loans, the action is exactly the same, the amount borrowed and the amount returned are the same. No additional costs, no hidden fees, no legal tricks that the lender can use in court. From the point of view of a loan company, it is therefore an absolutely unprofitable service, because it earns nothing. What’s more, it even generates its own expenses, because servicing each loan involves employee time spent on it. So why are these offers so widely promoted in the media?
Free loans but only on time
The answer is a simple entry in the contract, which each borrower signs. The free payday loan disappears when the customer is late with the installment payment or has not met any of the repayment dates. In such a situation, he is obligated to pay the full cost of the loan, ie interest, commissions and any insurance. Statistics show that , on average, every second financial liability is repaid late. It is not difficult to calculate that similar statistics also apply to free loans. And this means earnings for a loan company, even if some customers actually take advantage of the promotion and do not pay a single dollar more than they borrowed.
Short repayment terms
The lender’s time limits for repayment of such a loan are also in favor of the lender. These usually range from 2-60 days, however the standard is 30 days or simply monthly offers. The short repayment period means that many customers either consciously exceed it (knowing that they will not make the payment) or purely forget about sending the transfer. When taking free loans, it is best to immediately save them in your calendar or set a reminder on your phone about the upcoming repayment date. This will avoid a situation when ordinary staring loses a few dozen or even several hundred dollar, which could have been easily saved.
Small amounts of liabilities
In the case of free loans, borrowers set a fairly low limit on the amount of liabilities incurred. On average, it is about 2-3 thousand dollar, but on the market you can find loans up to 500 dollar or reaching even 5000, which, however, is relatively rare. Where do these limits come from? From the calculation of the profit and loss calculation of a loan company. People usually borrow small amounts within these limits, so the offer is tailored to their needs. In turn, borrowing higher amounts would be too expensive for borrowers, and this would discourage them from signing contracts.