These are exciting times in the loan market. In the past, not much happened in the loan market as there were only a few large banks and they were quite fixed in their business ideas and products. You could take a private loan, a mortgage loan or a car loan and maybe get a credit card but much more than that was not there. Today it looks a little different.
A lot has happened over the last 10 years or so. I was going to start with a small summary of the most important changes in the loan market until recently. This only applies to lenders and types of loans. Other things have happened, such as mortgage repayment requirements and a period of unusually low interest rates, which has affected how the Swedes have borrowed. But that’s not what I thought about blogging today.
SMS loans are one of the types of loans that have been added over the years and are now a popular alternative for those who want to borrow a small amount of money quickly and repay for a shorter period. It has been a talked about type of loan as it is more expensive than most other loans and many believe it puts many, especially young people, in a bad financial position. Other variants of the same type of loan are also called fast loans, micro loans or mobile loans.
After this, loan intermediaries also began to emerge, which gathered a number of lenders among them so that one could submit a single application but still apply to a 10-20 different lenders. All with just one application and a credit report and then you could get quotes and compare prices, in order to finally choose the lender with the best offer.
Many alternative banks have also emerged
In the past, it was the big banks that applied, but now more other players also want to join and take shares of the other banks. Such as SECA Bank, Lifewell Bank, ProSave Bank, Starlight Bank and just recently also Comfett Bank have opened the gates and offer the usual banking services such as savings accounts, credit cards, loans etc. This has obviously created a greater competition and pushed prices a bit, especially on mortgages that were previously reserved only for the few large banks.
On top of this, a number of smaller players offering private loans have also appeared on the market. These are only lenders and not banks and they primarily invest in smaller private loans, often in amounts between $ 10,000 and $ 50,000. This type of lender has obviously put additional pressure on the major banks, but in most cases they also have slightly higher interest rates and more expensive loans. Above all, they have given people more options and enabled more people to find a loan.
Today’s loan market
In recent years, even more exciting things have started to happen. We can see that, over a period of a number of years, things have started to happen to many of the lenders who previously offered smaller SMS loans. The classic description of an SMS loan was a loan between $ 500 and 5,000 that you could borrow for 30 days. However, this was then increased over time to become a loan between $ 500 and 10,000 which you could borrow for 15, 30, 60 or 90 days.
Hybrid SMS loans and private loans
Only in recent years have these lenders again renewed themselves. Instead of running on the classic small loan amounts and maturities of a maximum of 90 days, they have become hybrids between SMS loans and private loans. Many players offer loans on small amounts but also higher amounts, up to $ 20-30,000. They often have their flexible and short maturities for those who want this and you can, for example, borrow $ 20,000 for 90 days (1 year is the most common minimum term for a regular private loan).
Although these lenders have renewed themselves and become an intermediary between old SMS loans / quick loans and less common private loans, they still have the stamp as generally expensive. It is also still true. These loans are rarely particularly cheap. However, you have the speed and flexibility that attracts. It should be borne in mind that even the usual small private loans are expensive with many lenders.
An interesting step is what has been taken towards account credits. It is also an area that old lenders in SMS loans and some of the smaller lenders offering small private loans have expanded to. An account credit is a current credit that you can apply for and then be ready for the day you need to use the credit. The credit limit is usually around $ 20-30,000 and you can take advantage of as much of it as you need.
The great thing about account credit is that you have a current credit that can only be used when needed, so that you only have to borrow the amount you really need to spend and only the time you really need the money. You can also have the credit ready in advance so that you do not have to worry about applying on the day the need arises urgently. The disadvantage, however, is that even account loans are quite expensive as they have a higher interest rate than a regular loan.
Mortgages have also begun to be renewed. It is the most classic form of loan and something that you might think would continue in exactly the same style as always. However, some things have happened in the mortgage market that have required changes. It has become increasingly important to compete for mortgage customers as they make a lot of money for the banks and to “be unfaithful” to their usual bank has become a thing.
At one point it was introduced that the banks must list their average interest rates instead of just showing the list interest rates. This is because it has almost always been possible to bargain a great deal on their mortgage rates based on the interest rate and those who did not bargain had to pay an overpriced price. With the help of the average interest rates, you could see what you really could get for interest rates, and these were normally around 0.5 units lower than the list rates. In other words, you could often get close to 25% discount on the interest rate.
Very recently, even more competitors in the mortgage market have emerged, in the form of credit institutions whose aim is to offer mortgages with unusually low interest rates. These lenders often have some special and tougher requirements on those who lend and you can only borrow up to a certain amount or have a 60% loan-to-value ratio instead of the usual 85%. However, interest rates that are almost 30% cheaper than the usual players are offered.
These new players may not be something for everyone, but it clearly puts pressure on the mortgage market and does a lot for the competition. The banks have long had extra good margins on their mortgages, although their demands have been a little higher in recent years. These new players help to push down prices on mortgages and make Swedes more aware that there are different alternatives and that it is important to compare before choosing a bank.