Is there really something you can call a cheap SMS loan? If you believe the media in this country, an SMS loan is by definition reprehensible. It seems as it always be better off with the more classic private loans. However, the question is not so simple, but it is very affecting the whole thing, and I’ll take a closer look at this.
High effective interest rate
If you look at regular prices for SMS loans, there is no talk about the whole thing that they have a high effective interest rate. The only problem is that it is not a good way to compare SMS loans and, for example, private loans. This is because the APR is calculated on an annual basis and the short micro loans does not extend that far. Therefore, in practice, the effective rate as high because you count it all as you would take a payday loan January 1st and then pay it back at the end of the month. But to get money for this, you take out a new exact same loan that is used to repay. Then at the end of next month you take another loan to repay the first loan and then you also need to borrow more to be able to repay the interest. So you continue all year and then it has become a very expensive loan.
But because it is not as borrowing money in the form of microloans, this is not an interesting comparison. However, the effective interest rate used to compare two different micro-loans of a similar duration. And effective interest rates are great if you want to find the cheapest private loan.
But isn’t it expensive then?
Like I said, the effective rate is not something interesting when the cost of the loan will be are thinking of. But this is not at all the same thing as it is a cheap way to borrow money. Most of us think that the overall price of a payday loan is high and that it is not worth the money. But this is a question that you should ask yourself and not let anyone else answer. Do you think it is too expensive, for example, to pay about SEK 300 to borrow SEK 2,000 for 30 days? If you answer yes to that question then you should not borrow money in this way.
Offer for new customers
One interesting thing that one can make use of the offers that lenders have to their new customers. It is not unusual that it’s completely free to borrow money for the first time with a lender. Their idea with this is that you should like their service and then use it again in the future. However, there is no requirement for this so you do not have to borrow from them in any way again. Should you decide to borrow several times to do each time to compare what lenders are cheapest.
SMS loans vs private loans
Looking for a little bigger payday loan, there are often other options in the form of lenders who lend small personal loans. What you choose from these two options is most about your own will. Often usually be that private loans extending over at least 1 year is more expensive overall, even if the interest rate is lower. This is when the interest is paid over a much longer time. But the monthly payment will be lower as the amortization rate is not nearly as fast. On the contrary, for SMS loans it will be high monthly costs but usually a little cheaper overall.
Comparing Payday Loan
The most important thing before you borrow any money is that you can compare costs. It is only in this way that you can determine whether a payday loan is cheap enough according to you or not. On this site you can find comparisons of micro-loans which can give you a good idea of the price level.