Parabank - how does it work? How is it different from a bank?

I took a loan at a parabank - you must have heard someone say that. Every year thousands of Poles use the parabanks offer. These institutions offer low interest, free loans and cash transfers to your account in 15 minutes. Do you know what a parabank is? How does it work and how does it differ from a bank? Check it out!

What is a parabank?

Parabank is nothing more than a private loan company operating on the basis of the Civil Code. Parabanks are not covered by the Act of August 29, 1977, known as the "banking law". Legally, these companies are not banks. Therefore, it means that they are not subject to the supervision of the American Financial Supervision Authority, and their activity is controlled by the American Association of Loan Institutions

How is a parabank different from a bank?

As we mentioned earlier, parabanks should not be confused with banks. Their activities differ significantly:

  • Parabanks offer loans for a short repayment period - banks, in turn, want a longer loan period.

  • When applying for a loan in parabanks, the customer verification process is less detailed: a loan can often be obtained as proof, via SMS, with a guarantor, without presenting a certificate of income or without verifying the customer's creditworthiness.

  • Parabank loans are usually much more expensive than bank loans. This means that the total repayment cost will be much higher than the bank's.

  • Banks are included in the group of public trust institutions because they are an important element of the entire national economy. Parabanks are not controlled by the American Financial Supervision Authority, and submitting a loan application is characterized by an increased level of risk.

  • Banks and parabanks are characterized by a different mode of operation. Parabanks operate on the principle of a financial pyramid - the services offered by parabanks are performed with money obtained from other customers of the company. Banks, on the other hand, are an intermediary between people who need money (who create demand) and those who have a surplus of capital (and who create supply).

How does the financial pyramid work?

As we mentioned above - parabanks operate on the principle of a financial pyramid, which, according to many experts, is a quite unstable and risky system. We will take a closer look at this topic.

All services offered by parabanks are financed with funds obtained from other customers of this company. This means that if one of the clients does not repay its installment or its debt, there is a risk that another one will not receive financing because the parabank will not have enough funds for it.

Parabanks do not offer products that would allow customers to earn money - the only products they limit themselves to are lending. This is due to the idea that it is not the customer who will earn money, but the company - parabank.

What are the advantages of parabanks?

Since we mentioned a bit about the disadvantages of parabanks, it's time to discover their good sides as well. If you are a person who urgently needs a small sum - a loan company is the perfect solution for you. Thanks to applying for a loan at a parabank, you will skip the formalities related to submitting the application at the bank, which means reducing the waiting time for money. Thanks to this, as many lenders declare, cash can reach your account even in 15 minutes if you have an account with the same bank as the lender.

The loan period is also much shorter - although it is associated with higher total costs - but it also means faster discharge of the liability. Thanks to this, you also have the chance to pay off the liability ahead of schedule, for which you will not be charged additional fees (as is the practice in the bank).

Free loan in parabanks - how does it work?

A free loan is an ace up the sleeve of parabanks - you won't find this product elsewhere. If you are applying for financing for the first time with a given loan company, you can apply for a payday loan with the APRC equal to 0%! This means that you will pay back exactly as you borrowed - no interest or commission.

Do parabanks check the history in BIK?

Have a negative credit history? This means that you probably don't have to think about a bank loan ... Don't worry, however, because there is a solution for you - you will surely find a company that will grant you a loan, despite bad entries and lack of capacity. Parabanks verify their clients in various ways - one of them is to check BIK, but not only. If you have a guarantor - a person who will certify for you - or a certificate of fixed income, your chances of getting a loan are no less. Thanks to this, even with no creditworthiness, you can apply for a loan at a difficult time.

However, remember that every commitment we make is recorded in the Credit Information Bureau. Getting into debt with another loan - no payment or arrears in repayment of installments - will only worsen your situation. Regardless of whether you are applying for a bank loan or a non-bank loan, make sure you can afford it.

Is it worth applying for a loan at a parabank?

Whether to take a loan from a parabank or a bank depends on the situation in which you are. If you urgently need a small amount, a private lender will certainly be a better solution. However, if you want to build a credit history and lower loan costs, it is worth contacting the bank.

Before you decide to submit an application to one of the two institutions above, carefully analyze your situation! Good luck!

1500 $
min. $ 100 max. $ 25,000
24 months
min. 3 months max. 60 months

Installment from: $ 100 *

APRC from 0.00 % *