In several blog articles we have written about how sms are often scolded in the media, but even in many internet forums and social forums people write that sms are just rubbish. Most often it is those who have not taken any quick loans that write that all fast loan companies are rogue and carry on unscrupulous, while those who have actually taken sms loans are more constructive in their criticism. Some people write that they regret taking out an overpriced loan, but many are actually satisfied with the services offered by the fast mortgage companies.
In any case, many sms loans have an undeserved bad reputation while some small quick loans deserve harsh criticism. Above all, there are many loans that are too expensive when it comes to slightly larger amounts that have a longer maturity. For example, it is quite sick that some lenders have a loan cost of USD 5000 – 6000 for a loan of USD 8000 with a 1-year maturity when there are other sms lenders who take USD 1000 – 1300 for fast loans with the same amount and maturity. Of course, this is what makes the sms criticize, but that’s not the whole truth.
Another reason is that the media insists on always looking at the effective interest rate and it is obviously high when it comes to small short loans as it is not profitable to borrow for example USD 1000 for 1 month and take the same interest rate as for a large loan which put up for many years. If a loan of USD 1000 with a 1 month maturity would have an effective interest rate of 5%, the lender would earn type USD 5 on it.
Three measures that give room-clean sms
So how do you get a sms loan market that can be considered more room clean? The rules for sms loans have already been tightened with it has not, according to many, been sufficient. Well, we at PennySnap Finance believe that the following three actions can help a bit in the stack.
1. Interest ceiling with rhyme and resonance
In Sweden, all banks and other credit companies have the right to set what interest rates they want. The reason for this is that it is considered that it is the consumers who want to borrow money that decides what interest rate they are willing to pay. We can agree with this argument on PennySnap Finance. If you think a loan or other product is too expensive, you should simply refrain from this product, but even so, we may think that there should be some kind of limit on how high the interest rate may be. There are people who are desperate and willing to pay any interest only if they manage to borrow money.
However, the interest rate ceiling must be adjusted to the size of the loan and the repayment period. The interest rate ceiling should thus be different for different types of loans. It would be unreasonable for an ordinary private loan to have an interest rate ceiling of several hundred percent, but it is not unreasonable for a sms loan of USD 1,000 with a month’s repayment period. The question is only if it will be too much trouble to have different interest rates and then the whole idea falls.
2. Cost cap – can help in some cases
Last year, an investigation was started where, among other things, one would look at whether it would make sense to introduce a cost cap for loans. The idea is that a loan should never be more expensive than the amount you have borrowed. In short, if you borrow USD 20000, the cost of the loan may not exceed USD 20000. However, we think that such a measure is not sufficient if one wants to access too high borrowing costs in the case of ordinary loans, since loans with a fixed maturity never cost more than the loan amount. However, it can affect the cost of borrowing for sms loans which can be extended in perpetuity and online credits that have too low repayment requirements and that is of course good.
3. Tougher reprimands in carelessness
There are still sms lenders who are a bit sloppy when making their credit assessments and we think such carelessness should lead to the following reprimands:
- If a person who obviously should not have been able to borrow money has still been able to borrow, then the careless credit company should not be able to send the debt claim to debt collection or sell the debt to a factoring company.
- The debt should not be passed on to enforcement authority.
These measures would certainly cause careless credit companies to sharpen their credit ratings as they would otherwise risk losing what the company has lent. Yes, then they can neither get help from the debt collection nor the Kronofogd by collecting the money, nor can they sell the debt to get back a certain amount of the money. This is also something the investigation that started in 2015 looks at.
If the above three points were to be implemented, the sms loans would be guaranteed to be more room-clean, but of course the complainant would not cease until the effective interest rate falls to type 5 – 10%, which would be completely impossible for small short loans. There is no credit company that would go around it.
