Ashley Corn August 24, 2021
With the increasing demand for borrowing funds nowadays there are various types of loans came into place. Among them, one of the most popular ones is soft loans. No, there is nothing to think that it is something dedicated to purchasing soft materials. However, the only reason for having such a term is an easy repayment structure. It is also known as concessional loans. Due to getting the loan is the comparatively low rate of interest and competitive grace period, the soft loan is also termed as concessional.
What is a soft loan?It refers to a borrowing habit that comes with a low interest rate and an extended grace period to make repayment easier. Generally, money lenders sanction loans to earn profit. Nevertheless, in the case of a soft loan, the purpose is quite different from others. Lenders provide loans to everyone with a low interest rate so that unprivileged people can do something and maintain his family correctly. Usually, lenders agree to pay this type of loan during any natural disaster. For example, in 2020, the Govt. of the UK has agreed to pay a particular loan to people below the poverty line. Generally, lenders who provide such soft loans are usually large organizations and financial intermediaries. Even the Govt. itself has become the lender many times. However, the only purpose of circulating money among the people is to make them earning money. As soft loans offer good repayment options and a more extended grace period, those people can't repay the entire amount. Besides, it has also been observed that after borrowing money by applying for a soft loan, a person can quickly begin a new source of income.
What are the features of concessional loans?There is no doubt that such type of loan is helpful for unprivileged people. It does not require a credit check so that everyone can enjoy its benefits. Besides, the rate of interest being low helps those borrowers to save money during repayment. Some of the critical features of this loan include,
- No credit check During providing a soft loan, a lender hardly asks for a credit report. Generally, the credit report is mandatory for every type of loan like personal, home, car, etc. The one and only reason for checking credit score are to know the credit history of the borrower.A credit score represents the history of the borrower. If the credit score is below 600, then it comes under poor score. But in borrowing soft loans, there is no question of credit score evaluation.
- Low rate of interestThe other name of a soft loan is a concessional loan. By this term, you can get the hint of discounts. Well, this is quite unnatural to borrowers. Moreover, they need to pay a high amount of additional charges apart from the rate of interest.The only reason behind calling it a concessional loan is, low rate of interest. As it is a loan provided by government organisations, it always offers funds below the market interest rate. Therefore, one may enjoy low repayment even after borrowing more than 10000 pounds.
- Easy repayment options While borrowing money, a borrower hardly thinks about the repayment period. However, during repayment, when a borrower needs to pay a high amount of monthly instalment every month, it comes to the matter of burden. If a borrower fails to pay even one single repayment, then extra charges apply to it.There is no question of monthly instalments bounce with soft loans because the repayment period is more extended than others. On the other hand, you need not pay extra money even after the failure of a single monthly instalment. So, one may stay worriless.
- Ease of borrowing loan Usually, there is no question of a guarantor while applying for a loan. This soft loan is such a type of dent where the moneylender does not require any guarantor. While borrowing other types of secured loans, you must have to keep something as a guaranty; there is no question of any pledge.Besides, one may borrow more than 5000 pounds without any guarantor. As this type of loan is primarily for unprivileged people, financial intermediaries generally do not ask for any pledge or something like that.
- Long repayment period If you think that it is like a payday loan, we must clear this to you. No, it is not like any type of payday loans or short term loans. The soft loan becomes popular because of its way of lending.Loans for the unemployed, even with bad credit scores, are no longer impossible for soft loan lenders. Besides, a borrower gets enough time for repayment due to a long repayment period. On the other hand, such terms and conditions help people solve primary financial problems due to unemployment.