You may have heard of it: the flash credit. With this lightning-fast loan, you have the desired amount of money in your account within a few moments. Like what you do with payday loan companies open 24/7, you borrow with a flash credit, SMS credit, or mini loan for a small amount of a few tens to hundreds of euros. The term of the loan is never longer than three months, so you always repay the loan quickly. It seems like an ideal solution for people who are short of cash and need some extra money quickly. What are the advantages of this form of borrowing money? And are there any disadvantages to flash credit?
The advantages of a flash credit
There are both advantages and disadvantages to flash credit. The big advantage of flash credit is that you can borrow money quickly and without much paperwork. Often, the application process for the loan is via SMS, which is why these types of loans are also called SMS loans. The loan is mainly used by people who are acutely in need of money and by those who cannot take out other loans, for example, because they have a negative BKR registration. Let’s see what the benefits of flash credit are.
Fast money in your account
As the name suggests, flash credit is all about speed. The big advantage of flash credit is that you can quickly dispose of the money. You simply apply for the loan, you give a form of identification and you then get the money quickly deposited into your account. There is no BKR check involved and you usually do not have to provide payslips and other information. So it’s very simple.
Moreover, you usually also repay the loan quickly. The term of a flash credit is usually 15 to 45 days. In principle, you are therefore quickly rid of your debts and are therefore not, as is the case with other loan forms, tied to your loan for years.
Little red tape
As mentioned, a flash credit is also very easy to take out. Often you can sign up for the flash credit via SMS and you usually have the money in your account the same day (sometimes within an hour). You also have to meet a few conditions. This way you almost never have to show salary slips or fill in mountains of forms. Also, the lender usually does not do a BKR test with a flash credit. So there is little paperwork involved in taking out such a mini loan.
The fact that taking out a loan is so easy is that you need a guarantor. So you need to find someone who will be your guarantor. Because of the guarantee, the risk for the lender is relatively low. After all, if you do not repay the loan, the lender can recover the debt from the person who guarantees you. If you do not have a guarantor yourself, you can arrange this through the lender. However, there are usually high costs involved.
Negative BKR registration
Flash credit is especially attractive for people who cannot take out a regular loan. This is the case, for example, for people who have a negative BKR registration. You will receive a negative BKR registration if you default on paying off your debts. If you do not pay your installments on time, you will initially receive reminders and reminders. After a while, the payment arrears will be passed on to the BKR. If you have a negative BKR coding, you can no longer take out loans. You can get a negative BKR registration for payment arrears on your loans and mortgage, but also on credit card debts and telephone subscriptions.
However, the providers of flash loans usually do not look at the BKR registration. For people who have a negative BKR registration, a flash credit is therefore often the only way to borrow money. However, the interest on flash loans is usually higher than for other loans and there are often additional costs, such as for the guarantee.
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The disadvantages of a flash credit
A flash credit is especially quick and easy. However, there are also disadvantages to flash credit. These are, for example, the high costs associated with obtaining a mandatory guarantee. In addition, the interest rate for a flash credit is often on the high side compared to other loans.
Disadvantages of flash credit: high-interest rate
The current interest rate of a flash credit is 13.99% with almost all providers. This is one of the main disadvantages of flash credit. This interest rate is very high compared to the interest rates that banks use for other types of loans. For example, for a personal loan, you pay on average around 5.35% in interest, depending on the loan amount and the term. That is therefore considerably lower than the interest you pay for a flash credit.
Nevertheless, the final costs for a flash credit are often not too bad if you have a personal guarantor. This is mainly because the term of the loan is very short. Example: with a loan amount of 500 euros with a term of 30 days, you only pay € 13.99 for a flash credit with an interest rate of 505.41%. The costs for the interest are therefore only € 5.41.
External guarantor flash credit
However, the main disadvantages of flash credit are hidden in the guarantee. The biggest costs you incur for a flash credit are often those for an external guarantor. The providers of flash loans do not ask for pay slips and other supporting documents to check your creditworthiness but instead require a guarantor. This is someone who guarantees you in case you cannot repay the loan. If you have a guarantor yourself, for example, a friend or family member, there are no costs involved. However, if you do not have a personal guarantor, you can often arrange an external guarantee through the lender.
If you cannot repay the loan, the external guarantor will advance the amount due. You must then repay the loan amount to the guarantor. But an external guarantor usually has high costs (often more than 80 euros), which makes the loan a lot more expensive in one fell swoop. It is therefore worth trying to find a personal guarantor.