A few years ago, the SMS loan market flourished and many new lenders popped up. Today, I think that the trend is towards fewer lenders and that some of the existing ones are changing direction. We’ll look at how things are going for SMS loans today.
During the “good old days”, SMS loans were a little more focused on the mobile phone and being able to apply directly via an SMS. As Smartphones have become standard, the possibility of applying via SMS has also become less important. Now you can easily go to the lender’s website on your mobile and apply there.
At that time, the loan amount for SMS loans was also clearly lower
Then they normally borrowed between SEK 500 and SEK 5,000. The maturity was usually only 30 days but in some cases it could be 60 or 90 days. Gradually, it became more common with higher loan amounts and it was expected to be able to borrow up to SEK 10,000 from many lenders. Then it became more common with 60 or 90 days maturity and many loan amounts could only be borrowed with a slightly lower maturity.
It feels like the development of SMS loans has always been towards slightly larger loans and slightly longer maturities along with greater flexibility and more choice. Lenders simply want to offer a wider range. However, I think that the development of the past two years has been that the lenders who previously offered purely SMS loans or fast loans have now become even wider.
Where are the lenders going then?
Today, many lenders have either chosen to become a hybrid between classic small SMS loans and small private loans or have invested in credit. For those who have chosen to invest more in private loans, you can usually borrow between SEK 1,000 and up to maybe SEK 20,000 and can then choose several different maturities. Often, for example, you can borrow for 30, 90 and 120 days but also for six months and one year. Maybe even several years.
Or the lenders have chosen to go for account credit / online credit instead. This means that they have stopped lending money in the usual way and offer an account credit of, for example, SEK 20,000 instead. A credit is a little different in that you get the opportunity to use all or part of the credit in advance and then only pay interest on the exact amount you borrow and during the exact time you borrow the money.
Whether the move to account credit is due to something special is a little uncertain. I would think that SMS loans are generally downwards and that people would rather take small private loans with a slightly longer maturity. In addition, online credit / account credit seems to be on the rise and becoming more popular and of course, lenders want to try to keep up with that train instead of being stuck with a less popular concept.
I can’t help but be a little satisfied with how the development looks
SMS loans are a bit tricky as they cost relatively much and they often also create a risk for people to fall into debt trap precisely because they attract people to take loans that they should not take or can afford. Offering slightly higher loan amounts and slightly longer maturities generally feels more respectable.
Of course, small private loans also have their problems. These loans are also not very cheap and you can get an interest rate of up to 30 percent per year. This is a little worse than getting an interest rate of, for example, 8 percent from a major lender. You should be careful when taking a private loan from a smaller lender and make sure you get reasonable interest rates and terms.
When it comes to account credits, I like the idea of having a current credit that you can use, for example, as an extra buffer or when a need arises and money is missing from the cash register. The arrangement itself is good when you have the credit ready in advance, which makes it possible to get the money quickly, plus you only need to spend exactly as much money as you need at a specific time.
You do not then have to pay extra interest and fees, so that you can be forced to pay if you take out a loan for a preventive purpose. The disadvantage, however, is that even here the interest rate is quite high and if you make good use of the credit, it is not immediately better than if you had taken a regular private loan. In many cases, the credit is more expensive.
Why are SMS loans less popular?
Let me start by saying that it is not quite obvious that SMS loans are no longer popular. There are still many lenders and many who take this type of loan. It is only me, as someone who works with loans and lenders, that I have seen that many lenders who have previously been purely SMS lenders have for the time being developed to deal with other types of loans.
So there is nothing that says that SMS loans are on the way out or that no longer borrows. Just that I find myself seeing signs that other types of loans are starting to take their place here and there. I also can’t say with any certainty why this is so, but I can give myself some qualified guesses and discuss a little in general.
Always had a bad reputation
One thing that can of course affect is that SMS loans have almost always had a bad reputation and that the media has always talked about this type of loan in negative terms. It is almost just talked about that SMS loans are very expensive, that it is a common way for people to fall into debt trap and that people with poor finances risk to dig further down.
Despite all the negative attention, SMS loans have nevertheless remained popular and many have borrowed. But it can, of course, still be that over time people have become more and more skeptical and that more have begun to avoid these small and fast loans.
Limited customer base
I also imagine that there are a limited number of people who are actually interested in SMS loans. It is not a loan that everyone wants or needs to take and therefore, of course, there is not an unlimited number of customers. Although the same customers may return and borrow several times, not everyone can.
SMS loans have often been used by people with poor finances, as a way to stay afloat in financial problems. This means that some of those who might be interested in SMS loans for various reasons cannot or do not want to borrow time and time again. Some of them can certainly be denied borrowing because they have poor finances or they don’t even try.
The customer base can thus be reduced over time and fewer new customers are added. Especially if new types of loans or other types of loans (such as small private loans) will attract more. There is nothing to say that SMS loans will disappear altogether, but maybe some fine adjustments and better prices may be needed to create a more attractive product.