We know that the media is distressed and complains about how many people take sms. They believe that interest rates are too high and that people who really shouldn’t have received a loan are allowed to borrow and this means that tens of thousands of cases end up with the chancellor. We only partially agree with this. Interest rates are probably not the biggest problem if you only borrow a few thousand dollars, but if you take a large sms loan the interest rate is of course too high
Because of highest ineterst rates
Rather, we believe that it is the short maturities in combination with the high interest rates that are the biggest problem with sms loans. It is not always easy to pay back maybe 5000 – 10000 after just a month and if you put up the loan for longer than 3 months, the loan becomes way too expensive. This is why Lite Bank presents some inexpensive alternatives that have longer installment times and lower interest rates than typical sms loans.
So whose fault is it that sms, or fast loans, have become so popular? Is it the state’s fault for not banning them? Is it the borrowers fault? No, we would rather say that it is the banks’ fault, because most banks have not really kept up with the development and seems to think that the 20th century has not ended yet.
Look at the situation behind the note
First, they use a credit model that we do not really think belongs in the 2010s. They look far too much into the applicant’s history instead of focusing on the present. If applicants have payment remarks, it is usually completely run, then they do not even look closely at the case but the applicants are rejected directly. It would have been much better if they were trying to find out why applicants have received one or more objections. Was it because the person became unemployed or on sick leave, or was it because the person simply ignored paying their bills even though he or she could really afford to pay?
If the person simply ignored paying his bills despite decent finances, the bank should of course not grant any loan, but if the person suffered a temporary financial weakness but is on his feet again, old payment notes should not matter.
But this is rare, the banks give red light as soon as they see a note and that means that people with comments rarely have any choice but to take sms if they need to borrow money. If the banks had not been so tough, they would instead have been able to take a cheap private loan that they could put up in any year, and then fewer cases would have gone to the bailiff.
Temporary employment should not always be an obstacle
Secondly, almost all banks require permanent employment (until further notice), especially when it comes to unsecured loans. Today, there are over 3,600,000 people who have permanent employment, but over 720,000 have a fixed-term employment and this figure is constantly growing. Many of these temporary jobs are extended over and over again, so you might think that more banks could take this into account.
If applicants have had fixed-term employment for several years without interruption, then it is thought that the banks would be able to grant at least smaller private loans of maybe USD 5000-30000, which must be repaid before the last employment ends. But not then, unfortunately, there are few banks that do this, which means that people are forced to take more expensive loans instead.
There are sensible alternatives to bank loans
Thankfully, at least there are some lenders who offer loans of USD 3000 – 50000 with several years of maturity that do not require any permanent employment and which accept payment remarks. Their interest rates tend to be somewhere between about 10 – 33%, but it is still okay compared to the sms interest rate. The interest rate is higher than for ordinary private loans precisely because the lender accepts remarks and temporary employment which means that the lender takes a greater risk.
You will find several lenders that offer reasonable alternatives to both bank loans and sms loans under private loans.
If the banks had not been so rigid and more banks could think of accepting temporary employment and remarks at a slightly higher interest rate, they would have taken a lot of market shares from sms lenders, but it is obviously not interesting.