Micro-Finance Loans: Alleviating Poverty Without Charity

Preserving the Dignity of the Recipients

A year ago I found a small ad button on a website. Which site it was I can’t even remember. It just said Kiva, a Swahili word that means ‘agreement’ or ‘unity’. Since it is not often that one falls over Swahili words on an otherwise English website, my curiosity pushed the button and opened a whole new world.

For years I was irked by the immense overheads of big charity organizations. Of course I understand that big institutions have big overheads, but somehow it just did not seem right to me that according to Forbes on average in 2014 only 84% of monies donated actually reached a needy and deserving individual.

From pressing the ad button to learning more was only a small step. Kiva (http://www.kiva.org ) is a forerunner and the first ever person-to-person micro-lending website. Whilst on the website you are given the opportunity to browse the entrepreneurs’ profiles, complete with a photo and a little background information. It tells the prospective lender what the loan is intended for, how long the repayment terms are and whether the borrower has had a loan before. This allows an unprecedented insight and choice in the kind of loans a lender might be willing to sponsor. Some lenders only make loans to women, other will only support environmentally friendly undertakings…there really is a loan to fit everybody’s principles.

Once a suitable entrepreneur has been chosen, all that is left is to make a decision as to how much a lender is willing to invest. Every investment will be returned after it has been repaid, without interest and can either be withdrawn or reinvested. The minimum loan amount is $25. Very achievable even for the smallest pockets.

One small downside is that of course, as with any investment there are risks involved. Sometimes, although rarely, loans are being defaulted, especially in areas with a volatile political climate. This risk can be slightly lowered by spreading the amount one is willing to lend over more than one loan. Should the worst happen at least only a fraction of the capital is lost.

Personally I’ve so far funded 3 loans. One to Kenya, one to Uganda and another one to the Dominican Republic. All of them are being repaid as we speak and I was able to re-lend today to Azerbeijan. It will help Shaiq Salimov to buy another cow to expand his business. I love the idea that I am helping whilst preserving the dignity of the recipient. These are not hand-outs, but a genuine attempt at allowing somebody around the world the chance to take care of himself and his family. Kiva also issues gift certificates and I have used them for Christmas and birthday presents. Over the past few months Kiva has also added US entrepreneurs to their portfolio, so if you’d rather reach out closer to home…you can.

Really, I see no good reason why not. I shall continue to do my little part, will you, too?

Student Bank Loans Meet Financial Needs Beyond Federal Loans

Student bank loans are often necessary to get an education because federal student loans come short. Federal loans are a good start; payment doesn’t start until the student finishes school, the rate is fixed, and there are no credit requirements, but they usually don’t cover all of a student’s needs.

As education costs rise beyond what federal loans provide, financial institutions make a business of investing in a student’s education. They need the money to finish school and succeed in life, and student loans are almost impossible to dismiss by declaring bankruptcy, so this investment can be quite profitable.

Banks are willing to compete to get these students to borrow from them. If you have a good credit rating and/or a cosigner with outstanding credit, you can get Prime interest rates, or even lower, or banks which use the LIBOR (London Interbank Offer Rate) index to determine their interest rates can offer you the equivalent of Prime, and if current trends continue, LIBOR interest rates will probably end up being lower. A cosigner will be responsible for your debt if you don’t pay, so it has to be someone who trusts you, but if they have a good credit rating, you can get a good price on a loan even if you have no credit or bad credit.

Parents of students needing additional funding can apply for student loans in their name for their children. They can use a cosigner if they do not meet credit requirements.

Private student loans are also available for students with no credit or bad credit. They may have to work as well as study or they may have to settle for a higher interest rate and pay extra fees. This can lead to financial problems, especially if they don’t finish college, but if they do, it will have been worth it even paying a higher interest rate for a longer period of time.

Finishing college can justify certain extra risks, such as taking out higher-interest, shorter-term loans of other kinds to make up what student loans don’t cover. Students or parents can take an immediate financial burden as an investment towards a student’s education.

This can be disastrous if overused, but a student can cover certain day-to-day expenses and schoolbooks and supplies using a credit card. It can be helpful but should not be used as a source of significant funding or tuition.

If a parent or student owns collateral, they can put up property for the sake of the student’s education. They can use a home equity loan, for example, to cover college expenses. Student loans have the advantage of being payable after leaving school, but this can be a good way for parents to help their student children out.

Even if you have no credit or bad credit, student bank loans aren’t hard to find. Take the time to see what competing financial institutions can offer you before deciding.