When many people think of microfinance, they associate it with private lending, which makes people feel pale and powerless. In fact, microfinance and private lending are both ways of personal loans, which are not as terrible as what you see in the movies. Today, I will compare microfinance and private lending, and show you, which may be helpful for your loan.

Expected annualized interest rate of loan

Private lending: Generally speaking, the expected annualized interest rate of private lending is agreed by both borrowers and lenders, and there is no fixed interest standard.

Microfinance: The interest executed by regular microfinance companies generally rises by a certain percentage on the basis of the benchmark expected annualized interest rate.

Loan risk

Private lending: The transaction cost of private lending has always been high, and some of the interest involved is higher than the national regulations. It is for these reasons that the risk of private lending is generally high.

Microfinance: Microfinance companies generally lend money through normal procedures, which greatly reduces the risks they face. On this basis, microfinance is obviously better.

Loan time and processing flow

Non-governmental lending: in the process of lending, an agreement can only be reached if the relationship between the two is closer or the guarantor and both parties are closer. Therefore, the process of private lending is simple and fast, and the required information is not so complicated.

Microfinance: Regular microfinance companies have to go through the process, so it is normal that the lending speed is relatively slow compared with private lending.

Loan threshold

Private lending: Private lending is mostly for acquaintances, with low threshold and high risk.

Microfinance: For the sake of loan security, the threshold of microfinance companies is relatively high. When a microfinance company applies for a loan, the applicant must provide a series of information needed for the loan before applying for a loan.

From the above point of view, although there is basically no threshold for private lending, and lending is very fast, I believe it is needless to say that everyone knows the risks. Relatively speaking, even though microfinance has some thresholds, it has undoubted benefits in terms of expected annualized interest rate and safety. So I suggest that if you are short of money, try to choose a regular company to handle the loan. Private lending has a high interest rate, which you may be able to afford, but it is difficult.