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 last 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 USD 1,000 and up to maybe USD 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, USD 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.
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 still be true that over time people have become more and more skeptical and that more people have started avoiding these small and fast loans.