Direct Loans: How They Work and How They Help You!

Understand how these companies are responsible for the increase in available credit in the country. Have you ever stopped to think about how technology has made it easier for us in our daily lives that would have been impossible a few years ago? The existence of something like a loan fintech is just one example of this remarkable advance! How did people do when they couldn’t transfer a sum of money on the same day on their cell phone?

Or when they didn’t have a credit card in hand to buy what they still didn’t have cash to pay in cash? The truth is that life before technology directly reached the financial sector was much more bureaucratic. Worse, without many options. With meteoric growth, the multiplication of fintechs in Brazil has a fundamental role in increasing the supply of credit in the market. According to a survey by the sector itself, the credit given by fintechs should grow 47% and reach R $ 2.5 billion in 2020.

What are fintechs?

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We can bet that even without knowing what a fintech means you use some type of service that is only possible today because of all the developments that they have brought to the market. In practice, fintechs are companies that redesign the financial services area with processes based entirely on technology. The word fintech is an abbreviation for financial technology.

These companies are specialists and can offer different financial solutions, such as credit card, digital account, debit card, loans, insurance, among others that can be managed without the need for a physical presence at an agency. Do you understand how fintechs revolutionized the financial market and shook the hegemony of big banks? However, they don’t just work with one type of service. There are several types of fintechs. Credit Cream, for example, is a loan fintech . Good Lender Bank is a payment fintech. Toro is an investment fintech.

What are the advantages of fintechs?

What are the advantages of fintechs?

Fintechs offer innovative, simpler and more advantageous financial products. A bank has thousands of account holders, and these companies are able to personalize their service more, which directly impacts the final delivery of their products.

  • Technology : you can solve almost anything online.
  • Agility : less bureaucracy.
  • Novelty : services that innovate the sector and bring new solutions.
  • Fair price : usually offer services with lower prices and with quality.

Are Fintechs reliable?

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Everything new brings distrust before proving its efficiency and, even after a while, many people may still be suspicious. Take, for example, the big banks, seen as conservative today compared to fintechs and financial startups. Even today there are people who think it safer to keep money “under the mattress” than to deposit it.

The important thing even in this case is to check if the fintechs you want to do business with are endorsed by the market regulatory bodies. In 2018, for example, the National Monetary Council (CMN) authorized the creation of fintechs to make direct loans between individuals. This recognition is a demonstration of confidence for these companies.

The future of fintechs with Open banking

The Brazilian model of Open Banking is still being debated by the Central Bank and should start to be implemented in the second half of 2020. When this happens, banks will be able to share the information they have about customers with fintechs and financial services startups.

  • Which is?

Open Banking is a set of rules to organize the sharing of data and services in the financial system by opening and integrating information. This will make the institutions cooperate with each other to offer better services and products.

  • In practice

Changing banks will no longer be such a bureaucratic event in the life of Brazilians. Today, if the customer migrates from one institution to another (including even digital banks), they need to start their relationship over from scratch. This means that the history of a whole financial life, such as bills paid on time, wages deposited, installments, loans, spending profile is lost.

With Open Banking, this information goes wherever the customer goes

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This means that both banks and fintechs will have more personalized services and the chance for a credit limit and investment package more suitable for each profile. In a credit fintech, for example, it will be possible to get better rates based on the customer’s financial history. This advance will be just another step within a segment that is undergoing constant renovations.

Understanding Credit Card Cash Funds and How to Use It

Having a credit card has many benefits. Besides being able to be used for shopping transactions, credit cards also offer cash loan facilities for users. The loan can be an alternative source of funds to open a business or start a business.

If a credit card user needs a loan, you can take advantage of the credit card cash facility. The money comes from your credit card limit. Usually the loan value is around 40-50% of the remaining credit card limit.

 

Understanding Credit Card Cash Funds

Understanding Credit Card Cash Funds

Then the loan will be sent to your account. The bill will be added to your credit card bill so you can pay in installments every month. So don’t be mistaken, credit card cash is different from credit card cash withdrawals at ATMs. The difference lies in the maximum limit of funds that can be disbursed and interest.

If the customer withdraws the credit card cash, get ready to charge and high interest. While cash withdrawal funds are lower with a tenor in accordance with the policy of the credit card issuing bank. There are banks that set up a period of 3 months to 24 months with an interest of 1%. The longer the tenor, the lower the interest rate.

 

Credit Card Cash Mechanism

Credit Card Cash Mechanism

A simple example like this, you have a credit card with a limit of $50 million, and only used $10 million this month, meaning there is still $40 million left. Then, the card issuing bank offers you a credit card cash facility. Because you need to make additional capital, you agree to the offer.

After you meet the requirements, because the maximum loan value is only 50%, a liquid loan worth Rp20 million. The next stage, you just repay the debt along with the interest according to the specified tenor.

 

Same with KTA Products?

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Many people equate a credit card cash withdrawal fund with an Unsecured Credit (KTA) facility. But if examined, there are differences between the two. Let’s discuss the KTA.

Understanding KTA is a bank loan product without asset collateral. So customers don’t need to be confused about having collateral to apply for a KTA. Need funds quickly, KTA solution. Whether it’s for business capital, wedding costs, medical expenses, to home renovations.

The loan repayment process is done in monthly installments, the period of which is also determined by you. Usually ranges from 12 months to 60 months. If you are late in paying the installments or pay them before they are due, then there is a penalty fee charged.

In addition, many are tempted by KTA because of low interest promos, such as 0.99% per month. But if you pay attention again, KTA loans calculate interest in a flat 0.99%, meaning that the amount of interest expense per month is still (flat), even though the remaining principal loan continues to decline every month.

The calculation of effective interest is more accurate when compared to flat interest for a borrower, because interest is calculated based on the remaining principal of the loan. Flat interest calculations, it will look as if the interest is small, even though it is not.

If the calculation of flat interest is converted to effective interest, then we actually borrow with interest of 21% to 24% per year or 2% per month, not 0.99% anymore.

 

Cash Credit Card or KTA, Which Which?

Cash Credit Card or KTA, Which Which?

Credit card cash and KTA cash facilities have the same benefits as an alternative source of funds. Each has advantages and disadvantages, so as a customer, you need to know all the conditions when applying for the loan. Now, the choice is yours. But one thing to remember, the name of the debt must be paid on time so as not to cause other problems that will result in debt swelling.

This is often the reason to apply for a loan

Getting finance is a real nightmare for many self-employed. Banks are becoming more and more restrictive when it comes to lending, especially if you can’t just provide your car or house as security.

The chance of a bank loan for the self-employed is slim. It is, therefore, no wonder that the World Bank measures the global financing gap for small and medium-sized entrepreneurs at around USD 2 billion.

True to the motto: “A bank is a place where you can borrow money if you can prove that you don’t need it”. In the case of the self-employed, however, income often fluctuates due to the season.

This is often the reason to apply for a loan

This is often the reason to apply for a loan

Banks often take relatively old data into account when checking their creditworthiness. So the last income tax assessment may have been a while ago. If a business has developed well since then and the bank is not looking at individual BWAs, it can be very difficult to prove that the business has developed positively.

And if you have a negative Credit Checker entry, you don’t even have to register with the bank.

In many cases, the self-employed do not get a loan and therefore cannot invest enough in their sales, pre-finance goods, and larger orders, even though they have a strong credit rating. This is annoying because solid financing is an important part of growing business.

If every company had to save the necessary funds for larger investments before the investment could be made, many profitable projects would never come about.

So how do you get a loan despite being self-employed?

So how do you get a loan despite being self-employed?

1. Foreign banks: If you are missing the Credit Checker information, you can secure a loan from a foreign bank. Credit Checker plays no role here so that a loan with sufficient income can be obtained from a permanent position.

Of course, certain requirements are also checked at a foreign bank. The amounts of such Credit Checker-free loans start at around USD 3,500. In addition, you should always be aware of additional costs, as these often arise in such cases and are not always communicated very transparently.

2. Credit from private investors: In order to fill the financing gap, a number of online loan brokers have been established in recent years.

This includes Good Credit, a global online loan broker that specializes in self-employed and small business loans. The loans at Good Credit are unsecured and Good Credit does not ask Credit Checker.

Instead, the creditworthiness is checked with the help of online accounts, in which the self-employed person connects to Good Credit during the borrower check. Good Credit then receives a one-time reading right, for example, on your PayPal account and checks the creditworthiness.

A loan despite self-employment is possible if you are willing to look for alternatives beyond the banking world. There are specialized providers on the Internet that are geared towards the needs of the self-employed and entrepreneur.

When is a loan suitable for the self-employed?

Now we know how to get a loan in Germany despite being self-employed. But when is a loan worth it? There are three scenarios in which a loan makes sense:

1. Finance sales growth

Many self-employed people run a profitable business. In such cases, the need for financing increases with sales, especially for dealers. Since suppliers first have to be paid out of their own pockets, many self-employed cannot afford to keep up with the financing of the increasing inventory.

Without the financing of the necessary goods, orders cannot be accepted and sales do not grow as quickly as they actually could. Such a situation can be avoided with a loan and additional sales can be generated.

2. Bridge liquidity bottlenecks

Most self-employed workers are aware of seasonal fluctuations in sales. Sometimes there are even fads that cause demand for certain products to skyrocket or crash – without anyone having been able to plan it.

Seasonal or fashion-related liquidity bottlenecks can be bridged with a loan in otherwise well-functioning business. In such cases, it is worth investing and expanding sales in well-running areas instead of falling into hibernation and hoping that things will go up again.

3. Buy larger quantities at cheaper unit prices

If you negotiate well with your suppliers, you can often achieve price savings with larger quantities. Most wholesalers and producers give bulk discounts on larger purchases. It is often impossible to finance an expensive purchase from your own pocket.

In addition, the popular cash discount can often be drawn if you pay immediately. But you need sufficient liquidity for this. The savings that can be achieved from volume discounts and cash discounts are often higher than the interest paid on a short-term loan.