Social microcredits, what are they and who grants them?

You've probably heard about so-called social microloans more than once , but you might not know exactly what they are, and more importantly, whether you can apply for them and under what conditions. Your interest in these banking products is understandable, because they are undoubtedly one of the most advantageous financing options for your personal needs , and certainly superior to any personal loan, consumer loan, or other loan offered by financial institutions.

But first and foremost, you should know that these loans have a very specific purpose, which not everyone can access. They are intended for people who cannot access traditional financing channels . These are generally people in situations of social exclusion, and they come from very diverse social sectors, such as the unemployed, immigrants, single-parent families, and even separated individuals.

Social microloans have become one of the banking products with the strongest social focus. However, their availability has decreased significantly in recent years . Indeed, the loans of this type that were once offered by the now-defunct savings banks are no longer available to customers. And as a consequence of the economic crisis that has plagued Spain since 2008, it is now very difficult to find them with the same frequency as before.

Who grants them?

Most of these loans come from Microbank, a division of CaixaBank , which markets them in various formats. They are also offered through specific, isolated proposals developed by some financial institutions. However, beyond these initiatives, accessing this type of private financing is very difficult. The only remaining option is the conventional, generalist offerings provided by banks through their more commercially oriented approaches.

Right now, the entities grant their loans with interest rates, which in the best of cases can be subscribed with 6% or 7%. But nothing else, without dental financing being in their offers, for the long-term unemployed, or people in social exclusion, just to name a few examples.

However, and as a major new development, a series of proposals are being developed to finance entrepreneurial projects for unemployed young people, including those who are long-term unemployed . Their main objective is to help applicants find employment as new business owners or self-employed workers. Several loans are available that meet these criteria and offer very competitive terms for obtaining them, with interest rates not exceeding 6%.

Identity signs of social microloans

You've probably heard about them before, but you might not know exactly what they are or what their main benefits are. They grant amounts of up to approximately €20.000 , always intended to help applicants escape situations of social exclusion.

However, the appearance of other microcredits with a marked ecological accent is increasingly frequent, which affect the change in the consumption habits of users. Both in their homes, in vehicles, use of energy, etc.

But the real advantage of this specific type of financing lies in the price you'll ultimately pay. Interest rates are very low, ranging between 4% and 7%. Furthermore, they are completely free of any fees or other administrative costs. You'll only need to worry about repaying the borrowed money plus the corresponding interest, without any additional expenses to increase the overall cost.

Regarding repayment terms, the differences aren't as significant as with traditional loans, although they do offer considerable flexibility. This means you can close the deal quickly or take up to six years to pay it off . As a result of all these features, the final cost of this loan will be lower than with other credit options.

What microcredits can you contract?

At present, and although its offer has decreased notably, you are still in a position to order some of these social products. As long as you comply with the requirements imposed by the issuing entities, and generally they are very hard, so that only the most needy clients can hire them. From this scenario, a couple of proposals have been enabled that can be very useful for your interests.

Microbank has developed several initiatives of this kind, although with completely different marketing approaches. One of these is its Personal and Family Microloans. These products grant recipients a maximum amount of €25.000 , with a repayment term that reaches a maximum of 6 years, including a grace period of up to 12 months.

This type of financing is available to individuals with annual incomes below €18.000 , or to families with combined incomes below €36.000. The funds can be used to cover less conventional expenses, such as those related to housing, healthcare, education, or even family reunification.

Another of their initiatives is formalized through Eco Microcredits, which finance the development of sustainable projects, the purchase of environmentally friendly products , or improvements to the energy efficiency of your home or business. And for those who wish to launch a business project, they have made available Microcredits for Entrepreneurs and Businesses.

If you want to become an entrepreneur and you want to start a self-employment project, a self-employed person or a micro-business that you want to boost your business, this special financing is designed, which will help you make it happen. Within this professional segment, other products have been marketed that maintain similar margins in their proposals.

One of these options comes from Unicaja, which has been promoting the First Business loan for several years. This loan provides an amount that cannot exceed 80% of the investment, up to a maximum of €18.000 . You have up to five years to close the deal through repayment.

Meanwhile, Caja Laboral's strategy has materialized in another financing option with similar characteristics. This particular option is aimed at young entrepreneurs, provided they demonstrate the viability of their business project . The advantage is that no guarantor will be required. A very competitive interest rate of just 3,5% will be applied to the fixed-term deposit.

The ten keys to formalize them

Not all clients are eligible for social loans, and it all depends on the profile you present in your application . However, you will need to be aware of certain criteria to determine if you qualify for this special source of financing. The biggest hurdle will be getting approved, but if you are one of the lucky ones who manage to secure one, you will have access to excellent terms.

In any case, you'll have no choice but to repay them within the agreed timeframe through a monthly installment system, just like a regular loan. To be granted the loan, you'll need to present a viable project; otherwise, it will almost certainly be rejected. And of course, you can adapt your application to some of the following tips we'll share.

1. There will be no other solution than scrupulously comply with all requirements demanded by the issuers of these products of a marked social nature, since the candidatures are analyzed in great detail and precision to be accepted.
2. If you are not included in any of the social sectors to which they are directed, You better give up the attempt, because they will surely deny your claim, and you may waste a lot of time in its process.
3. You must respect their subscription conditions, since even if they are social microcredits, it does not prevent you from skipping the contract, which on the other hand, would have heavy penalties through the expenses they impose on you.
4. They will not require you to have contracted other products (investment funds, pension plan, time deposits, etc.) with the entity. If anything, a checking account where you can receive the amount demanded, and send the monthly installments to finalize the operation.
5. Nor will you need in any case the endorsement of other people (family or friends), but only that you respond to the project, or comply with the requirements presented by the banking entities.
6. You will be able to access amounts that are not excessively high, which reach a maximum limit of around 20.000 euros, but little more, since their commercialization is not governed by large amounts.
7. Take advantage of its exceptional contracting conditions, since you will not be forced to pay any commission (study, opening, early cancellation, etc.).
8. The offer that you will find from now on will be rather scarce, and perhaps it does not fit your profile as a plaintiff, or perhaps with very harsh conditions for it to be granted.
9. Only if you are unemployed, immigrants, or a single-parent family will you be in perfect condition to start the application for any of the microcredits authorized by the banks.
10. And finally, remember that before your request, you will be obliged to read the clauses of the contract, to make sure that you really meet all the requirements so that you can finally sign the contract with the bank.