Why do people take quick loans?On February 12, 2020 by admin
Best Lender found an old survey that was done by the Swedish Consumer Agency and the Kronofogdemyndighet using the community site Playahead (which is now closed). The survey was made 9 years ago, shortly after the fast loans began to emerge in the market, and you actually become a little dark when you read it. Among other things, it showed that almost a quarter of those who took sms had debts with Kronofogden, but thankfully it doesn’t look like that at all today.
Of course, in recent years it has been found that some have managed to borrow money despite having had debtors’ debt, but it should not be. The lenders who grant quick loans to debtors now have to pay a penalty fee to the Swedish Consumer Agency for this and in addition they receive a warning and can be forced to close down their business. This, of course, has meant that the fast-loan companies that want to be able to continue to operate in the market do not grant fast loans to debtors now and that is of course good.
What does it look like today?
Much has thus changed since the Swedish Consumer Agency and the Swedish Crown Securities Agency’s examination of sms loans, as the rules on fast-mortgage companies have been sharply tightened in recent years. Therefore, there is no reason to make any kind of summary of the survey because the results do not at all match what it looks like today.
Nevertheless, there are some interesting facts in the survey that Best Lender believes are fully relevant today and that is why people take quick loans and what the money is used for.
1. You get the money right away
Yes, getting your money right away was the biggest reason why people took sms loans according to the 2007 survey. This is in good agreement with Best Lender’s own experiences and analyzes. It is not really that strange, since it usually takes several days to get a regular private loan.
2. It is easy to apply
We have long understood that the flexible application procedure for fast loans makes many people choose to take such a loan. Nine years ago it was usually done via sms which was then considered smooth but applying on the lender’s website is even smoother. A big advantage of this is that you can clearly see what interest rates, fees and conditions apply when applying online, which is also something that has improved significantly over the years. Besides, it is not particularly difficult to apply for private loans online today.
3. Low requirements
According to the 2007 survey, the third biggest reason for people taking sms was that the sms lender did not look closely at what the applicant’s finances looked like. That is not exactly the case today, although there have been some fast-loan companies in recent years that have not really taken care of this point and they have received reprimands as a result. Today is probably the third strongest reason instead that the fast mortgage companies usually have significantly lower income requirements than the banks have.
4. Nice to avoid personal contact
9 years ago you usually had to go to a bank or at least talk to a bank by phone when applying for a loan, then a paper contract would be signed. Therefore, many people felt it was more convenient to apply for a sms loan because then you were not asked by the bank. Of course, this may be the case today, but the fact is that there are lots of private loans you can apply for without personal contact.
In any case, many people still think it’s nice to avoid having a bank or a credit company when they want to take out a loan.
What is the money used for?
The Consumer Agency’s survey from 2007 showed that 38% of borrowers used their sms loans to pay their current bills, about 30% used the money for such things as clothing, electronics and other things and 19% paid off other loans with it. We have not been able to find a similar statistic for what it looks like today, but you can at least divide those who lend money into three groups when it comes to fast loans:
1. Those who lend to succeed
Of course, there are people who find it difficult to get their finances together, but who do everything to avoid ending up at Kronofogden and therefore take sms.
- You borrow to pay off on other loans.
- You borrow to clear your current bills.
- You borrow to have food on the table.
Of course, this is not good at all and usually it makes the economy even worse. So what to do then? Well, you can find out by reading our articles on how to avoid debt and how to get out of debt.
Please also read our blog article that it is sometimes better to let a debt end with debt collection or Kronofogden directly instead of waiting, no matter how bad it sounds.
2. Those who lend to unnecessary things
There are many who are in debt indebted and who are irresponsible with their finances. For example, you lend to:
- Partying, gaming and other entertainment even though you can’t really afford it.
- You borrow for impulse purchases. So you want to buy something with borrowed money and then there is a risk of regret.
- Unnecessary consumption in general. So you buy a lot of gadgets that are not vital even though you can’t really afford them.
3. Those who borrow for a good reason
Yes, there are actually good reasons to take quick loans, for example in the following situations:
- You see that what you decided to buy after you got paid is sold out. For example, if you intend to buy a new computer for USD 7000 which only today costs USD 5000, you will actually benefit from paying it with a quick loan instead of waiting, even if you have to pay USD 500 – 1000 for the loan. Otherwise, there are actually free sms loans with no interest and fees, so if you take such a loan you save USD 2000. But pay back the loan on time!
- Your car breaks down and needs to be repaired and you can’t do without a car. Then it might be good to cover all or part of the repair costs with a fast loan.
- You have a hard time paying a bill with it being just a one-off phenomenon and you know that you can pay back the quick loan after the next salary only if you start to skimp a little.