The name flash loan
Another name for a flash loan is a flash credit, a mini credit or an SMS credit. This is a loan with a short lead time and also a low loan price (a small amount). Usually, it is about a number of tens to hundreds of euros that you will borrow. A short lead time for the flash loan means a maximum of three months. Usually, however, the term is much shorter than three months. It is not for nothing that the turnaround time is so short, because it means that those who provide the credit do not fall under the regulations of the Netherlands Authority for the Financial Markets (AFM) and the Financial Supervision Act.
What is AFM?
AFM stands for Authority for the Financial Markets. It is the Dutch behavioral supervisor on the financial markets. The AFM has been in existence since 1 March 2002. It supervises the behavior of participants on the financial markets. You can think of fairs, brokers, accountants and financial service providers.
Law on financial supervision, what is that?
The Dutch Financial Supervision Act, also abbreviated as Wft, regulates financial institutions in the Netherlands. From January 2007 this law came into force. The Wft has a number of objectives, namely transparency, targeting and market orientation.
Changes and consequences
Some time ago there has been a change to the Financial Supervision Act. This has ensured that the flash loans are supervised by the AFM. The change was due in June 2010, but has been delayed. If the change is implemented, rules of advertising and credit supply also apply to flash loans. After the change, the providers of the loans are also required to state the annual percentage rate.
Meaning of a flash loan
Many people speak of a mini loan with a flash loan, because it is about a small amount that they will borrow. The money is usually repaid within a month. The money from the flash loan can often be requested within a few minutes. You usually only need to submit a copy of your ID and your payslip and the application can then be served. Any subsequent request can then always be requested by SMS. There are also a number of providers of flash loans that do not purchase a BKR test.
The high cost of the flash loan
A statutory percentage of 15% is usually requested for the flash loan. These costs are usually higher than the interest on the loan. The providers ask you to pay more if you want to deliver less paper. Sometimes you can also be asked for an obligation of a guarantee. This can also result in higher costs. If you are unable to repay your loan on time, a penalty interest will be calculated or administration costs will be charged. If you have submitted an application by SMS, an amount will often be charged for the SMS messages that you receive. This ensures that the flash loan is often a more expensive option than a credit at a bank, but the advantage is that you can ask for it more easily and the money almost directly on your account.
Which loan are you going to take out?
With a flash loan, the advantage is that the money can be borrowed quickly and also easily ends up in your account. But what you have to watch out for is that you often borrow too much and too fast money than is good for you. The simplicity with which you can borrow money with the flash loan can be a pitfall and put you in great trouble. Do not borrow more than you really need at that moment and make sure you know that you can also pay back the amount within the specified period. The flash loan becomes even more expensive if you have to pay a fine if you do not fulfill your promise (repaying the borrowed amount on time).
Borrowing money quickly
If you want to borrow money quickly, the flash loan can be a great solution. More and more people are using this method of borrowing money, because the money is on your account within ten minutes. For example, it can be a godsend if you have not yet received your salary and you still have to make a purchase. You do not have to wait for your salary to arrive. For example: you have four children and your washing machine breaks down. Family lives too far away to do the laundry there and there is no laundry in the neighborhood. The month is only halfway, your salary will be delayed. You can still purchase a new washing machine with the help of a flash loan. When your salary is paid, you can pay back the flash loan. In this way you run little risk of having a debt for too long (maturity of the flash loan is short), however, you pay high costs for the flash loan. Try to keep some money behind for calamities by saving every month. If that does not work then the flash loan can help you out of the fire.
Operation of a flash loan
You can request a flash loan via SMS. How does it work?
- You send an SMS to the telephone number of your lender.
- In the text message you will find all the details of the loan (think of your name and the amount to be borrowed).
- Then you will find out whether a lender wants to lend you money (the provider can check your BKR data).
- If the lender agrees, you must agree to the loan conditions.
- The amount of the flash loan is then paid into your account within ten minutes.
- Within a few weeks, you often have to pay the money back (up to three months, but usually within 15 or 30 days).
Whether or not BKR control?
It is possible that the money provider will check your BKR data. The reason is that the money from the flash loan must also be repaid quickly.
A flash loan is a very expensive form of borrowing. The costs are usually designated as closing costs or treatment costs. Usually you think that the interest is not that bad. But if you are going to count on an annual basis, the interest is often 200 to 500% of the loan. This also depends on the amount of the amount you are going to borrow and the term of the loan. Make sure you are well aware of the amount that you have to pay back in total.
Benefits of flash loan
The big advantage of the flash loan is that the money is quickly in the bank account. You can spend the money within a few minutes. This can all be arranged so quickly because of the simple application method. You can therefore quickly make a purchase if your salary is not yet within.
Disadvantages of flash loan
The disadvantage of the flash loan is the extremely high costs. You startle when you calculate what the interest is on an annual basis. So think carefully about whether you really want to borrow / borrow by means of a flash loan or if there is another option. Sometimes you can not decide otherwise and you need money quickly, then the flash loan offers a solution.