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Artificial Intelligence vs. Microinvest Expert: Answers to the Most Common Loan Questions

Since the advent of artificial intelligence, obtaining quick answers to frequently asked questions has become a fast and easy way to discover everything you’re interested in. Popular questions among clients include: What are loans? How to calculate a loan cost? How to manage your budget? What to do when you are refused for a loan? What if you can’t pay? At Microinvest, as part of the international Global Money Week campaign, we strive each year to provide useful and relevant information about money and loans. This year, we aim to do it in a totally new way.

Together with our colleague Ivan Pulucciu, the Head of Business Underwriting Unit, who participate to all loan decisions, we decided to test the recommendations from the most popular chat platform in 2023 and complement them with useful tips from Microinvest for making responsible and profitable loan decisions.

What factors should we consider before taking out a loan?

Chat GPT: Loans are sums of money borrowed for a specific period, typically with interest. Before taking out a loan, it is crucial to carefully analyze our financial situation and repayment capacity. Important aspects to consider include the purpose of the loan, our income and expenses, the interest rate, repayment terms, and credit history.

Ivan, Microinvest: Moving beyond the basic definition, I would describe a loan was a tool that enables you to acquire something valuable for yourself and your family, helping you achieve a goal on time. From the decision to take out a loan to making the desired purchase, several stages must be navigated. This process includes a detailed analysis of the repayment terms and assessing how they fit within your budget. The purpose of the loan is equally important. Purchasing low-quality items that quickly break down or making unnecessary investments can lead to regret. Therefore, it is crucial to approach these decisions with utmost responsibility, considering both the benefits of the investment and the potential risks involved.

Why would a loan be declined?

Chat GPT: There are several reasons why a loan application may be refused, including negative credit history, insufficient income, existing debts, the purpose of the loan, lack of collateral, and incomplete or inaccurate information.

Ivan, Microinvest: Refusal in lending is an unpleasant moment, firstly because your application is not accepted, and secondly because you will not be able to carry out your plan. However, a refusal can sometimes protect you from potential problems, such as penalties and over-indebtedness. Reasons for a loan denial include over-indebtedness, negative credit history, or a risky lending purpose. Sometimes alternative solutions are proposed; for example, if a large loan is refused, a smaller amount might be offered. At Microinvest, we maintain open communication with our clients about these issues. We explain how loan costs are calculated and why a particular loan may not fit their budget. Some clients have even thanked us for preventing them from making an inappropriate purchase. Others, initially refused, have returned later and successfully obtained the financial support they needed.

How to differentiate real and calculated payment possibilities?

Chat GPT:  The real possibility of payment refers to the amount that a person can actually afford to repay without compromising essential needs in their budget. This figure may differ from the calculated payment possibility, which is typically an estimate based on averages and may not account for individual anticipated needs or unexpected expenses.

Ivan, Microinvest: When you really want something – be it a car, phone, piece of equipment, or even a house – you might hotly analyze your ability to pay and rush into taking a loan to fulfill your dream as soon as possible. However, in such situations, the risk of default is high due to a potentially unrealistic assessment of your financial capabilities. Here’s an important recommendation: it’s often safer to opt for a longer-term loan that allows for early repayment rather than a short-term loan with high monthly payments that you might struggle to meet. To calculate your actual payment capability, start with your fixed or average monthly income, subtract your personal expenses, and set aside some savings for emergencies. The remaining amount represents your real capacity to pay. Keep in mind that while there is a calculation formula for this, it may not always align with your actual situation since everyone’s expenses vary. This principle applies equally to business investments, which are critical for growth. Thorough calculation and analysis are essential to efficiently achieve your business goals on time. As mentioned, a beneficial loan is one that solves problems rather than creating new ones.

Tips for budgeting when you have a loan

Chat GPT: Budget planning is a crucial process that aids in managing expenses and saving for long-term financial goals. The main steps include: calculating your income, identifying all expenses, prioritizing these expenses, setting a monthly budget, and regularly adapting this budget based on actual expense monitoring.

Ivan, Microinvest: There is no one-size-fits-all formula for budget planning as it varies from person to person. It’s crucial to keep in mind some straightforward recommendations that can help you tailor a planner to your needs. A key strategy is to begin with basic expenses and then address additional costs; doing the reverse can lead to risky financial situations and discomfort. Encouraging savings is also important. Decide how much you can save each month and, for added motivation, calculate how much you will have saved after a year. It’s rewarding to know that in 12 months, you’ll have a specific amount of money that could be used for vacations or as a down payment on a significant purchase like a car or house. Most importantly, financial education should begin in childhood to foster responsible adults. Engage children in conversations about money and loans in simple terms they can understand, but ensure to answer all their questions. Learning to manage finances from a young age makes it much easier to plan income and expenses responsibly.

How does Microinvest get involved in the financial education of society?

Chat GPT: Microinvest, as a non-bank lending organization, actively contributes to financial education through various projects aimed at helping clients understand financial concepts and manage their finances effectively. Through these initiatives, Microinvest plays a crucial role in enhancing financial literacy within the community.

Ivan, Microinvest: I am pleasantly surprised and grateful that our involvement in financial education campaigns has been noticed and appreciated. Microinvest employs a unique approach to financial education. In every client interaction, whether through discussions, visits, or consultations, we are eager to provide answers to any questions. Unfortunately, there are still many who do not manage their budget effectively; they spend their entire salary as soon as they receive it and later struggle with how to cover their monthly needs, leading to over-indebtedness. Conversely, some people become more financially responsible when they take out a loan, knowing they need to repay it on time, which teaches them to manage their finances better. As a financial institution, we strive to provide essential information to everyone, fostering strong relationships with our customers. This approach has led more than 46,000 of our customers to share their positive and responsible lending experiences with friends and family, thereby enriching the entire community. Additionally, our company actively participates in international financial education campaigns like Global Money Week, which helps instill financial literacy from an early age.


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