There are many people asking the same question about these things, “Do microcredit loans work?” The answer is yes they used to work wonders when they were first brought to market and no, not anymore though. People haven taken advantage of them and ended up borrowing more than they can pay back.
When used for what they were originally designed for they had a great track record but companies have found ways to turn a good thing into another drain on the poor and disadvantaged.
Original Micro Credit Loans
These loans were designed to support entrepreneurship and alleviate poverty. They are basically small low interest loans given to the poor. If you were to participate in one of these loans you would have a 95% success rate in paying the loan back and actually making money using the loan for entrepreneurial ventures. When a person paid back these loans they were able to borrow more money. So you built a credit system with the lenders.
You would borrow in groups and invest the monies borrowed into your own businesses. Many a poor man created a successful business by starting out using micro credit loans.
Modern Day Micro Credit Loans
Modern day microcredit loans have taken a very predictable twist and are now being compared to payday loans. They have increased their interest up to 20% and many are now being backed by independent banks who are only interested in their bottom line.
Originally they were backed by non profits and the government.
They prey on the poor and disadvantaged and are quickly becoming another avenue for the loan sharks out there to get a big bite out of the poor and disadvantaged.
With many states cracking down and outlawing payday loans, this type of loan could grow into epidemic levels quite quickly.
We here at Eliminate Payday Loan Debt highly recommend that people stay away from these and any other high interest short term loans if you can. Now not only do people need to worry about getting caught in the payday loan trap, they are now needing to watch out for the micro credit loan trap too.
If you have out of control debt we can help. Give us a call toll free at 1.877.734.6700, or fill out our form by clicking here for a free no obligation quote on how we can help you!
Anytime something is too easy, it is usually going to cost you in the long run. I hope this information helps you make wise choices when choosing who you do business with when borrowing money!