Mini loans are one of the most expensive forms of loan that we have in the Netherlands. The costs of these direct money loans are usually between 20 and 35 percent of the total amount of money borrowed. In a number of cases the costs of the borrowed money are immediately deducted from what you get in your account, in most cases the amount is on top of the borrowed money.
Mini loans are popular because consumers can close them without much hassle. You usually do not have to send any paperwork, and you can usually have the borrowed money in your account within a day. Often there is no BKR credit check either. In addition, the providers of the mini loans use slick marketing. But that a mini loan can cost a lot of money is beyond doubt.
Research Mini Loans
Mini loans have been in the news frequently in recent years due to usurious practices. New legislation would put an end to this. But also in 2013, the providers of mini-loans know according to research (pdf) from Moneyview “to mislead the consumer and to circumvent the legislation”. Sometimes it happens that a court matter pronounce but in many cases it is really up to the consumer to pay attention.
The research into mini loans, for example, concludes that providers attach many extra costs to these direct loans. For example, one of the providers, Debet Services, charges advisory fees. “For a loan of € 200 with a term of 21 days, € 38 will be charged in consultancy costs.”
Other providers charge extra costs due to the obligation of a guarantor. Although there is also the possibility that you choose a personal guarantor, it is usually obvious that you choose the guarantor who offers the provider of the direct money loan.
The cost of this guarantee is often between 20 and 35 percent of the money borrowed. For a loan of 400 euros you quickly pay 100 euros extra. You must then repay that amount of 500 euros within 30 days.
Advantages of mini loans
On the other hand, there is also something to be said for mini-loans and the higher costs. This concerns direct money loans for a short period. It is not possible for providers to make a little profit with interest alone, especially not with the maximum interest rate of 14 percent on an annual basis. The profit for a provider of a loan of 400 euros for 30 days is then only a few euros, and of course they never get the costs out of it.
This while there is a demand for mini loans, loans for only a short period. People who have insufficient income for a revolving credit, for example, sometimes need this. For them it would be good if there might be another way to borrow money or get help with debt in an easy way.
Nevertheless, these are often the people who have little money anyway or who are already burdened with a substantial debt. As a columnist from Nrc Next concludes : “If people get into trouble because of flash credits, they are already in trouble.”
The providers of mini-loans make smart use of the opportunities they see in this and deliberately aim for this niche in the market for direct money loans. In addition, they also know very well how to train certain matters.
The AFM indicates that various investigations have been started and that measures are being prepared. But because some providers object or appeal against possible steps by the AFM, the investigations unfortunately sometimes take longer than desired ( source ).
It is therefore not the ordinary banks that move in this field, but companies that deal solely with this niche. Special rules of conduct for mini loans would therefore be good.
Because now the costs are very high, despite the new regulations. For example, see the table above for a cost comparison if you pass on these costs as if it were a loan on an annual basis.
- You can request a mini-loan directly from Ferratum.nl or Saldodipje.nl, but there are high costs involved.
- These costs are not immediately visible from the websites of the mini-loan providers.
- The risk of a mini loan is therefore high. The mini loan is therefore often discouraged.
- People with debts, a low income or a negative BKR registration in particular have to think carefully about whether they want a mini loan.
- There are also alternatives to the mini-loan that are cheaper.