Technology is one factor that has made banking far easier these days than it has ever been. One can make all kinds of financial transactions on an internet-enabled device. You may not need to visit a brick-and-mortar bank for months if you have their app on your mobile device.
The ease of making transactions has also spilled over into the process of taking out a loan. One does not need to go to a lender, fill out hard copies of forms or submit documents manually before getting the funds. There are online lenders whose lending process is done online from start to finish.
There are several types of loans that one can apply for electronically and they include payday, personal, and SMS loans. However, the one that seems to be the easiest of them all is an SMS loan. You can click here if you want more information on payday loans.
In this article, we will discuss SMS loans so you can have a better understanding of how it works, legality issues, and other important.
Basics of SMS Loans
This is a financial product rolled out by lenders that enable their customers to apply and get approved for loans just by sending a text message. Some lenders offer this product through bulk SMS messages where they invite customers to apply for a credit facility.
This credit facility is usually for small amounts and the process is usually amazingly fast compared to other types of loans. It is also usually open to persons who are already registered on the lender’s platform. Upon registration, the lender will check the applicant’s information and approve or decline them. When an applicant is approved, the person is given a PIN (personal identification no).
It is this PIN that’s assigned that the applicant will input when they send the text message requesting for a loan. At this point, the lender does not need to carry out any check before approval is given. It is assumed that the accreditation done before assigning a PIN should suffice.
Once the loan is approved, the money is disbursed most often on the same day. This is why some people also refer to it as a same-day loan. But in actual fact, they are not the same. The limit for same-day loans is usually higher than that of SMS loans.
The interest rate for a credit facility gotten through a text message is usually very high and the repayment period is quite short. In fact, creditors have been known to charge as high as 8,000% as interest.
SMS Loans and Legal Guidelines
The issue of legality for this kind of loan is strictly on a regional or country basis. Some countries allow it but if you are thinking of getting SMS lån i Norge (SMS loan in Norway) bear in mind that it is illegal. However, some lenders still use this term when advertising their small and microloans.
There are some particularly important guidelines that govern the small loans industry. This is especially true in Norway. Some of these include: –
- Payment notice(s) – This is a notice placed on a borrower’s credit report showing that they are in default on their loan.
- Low income – The laws governing small loans state that a borrower cannot be approved for an amount that is five times more than their annual income.
- Low credit score- The credit score of a borrower is the total of their creditworthiness. This factor is what determines the credit rate that a borrower gets. The higher an applicant’s credit score is, the lower the interest rate they can get.
SMS loans are certainly a great innovation, especially considering how easy it is to apply for one and get approved. Despite the fact that they may not be legally available everywhere, it is still great that they are available in some other locations.
That said, for those who reside in locations where SMS loans are not available, there are thankfully other alternatives they can take advantage of and still enjoy a high level of convenience. In the next section, we will discuss other alternatives that you may want to explore.
SMS Loan Alternatives
Considering that fact that SMS loans may not be available everywhere because of the legal guidelines in various jurisdictions, it is important to provide alternatives that can be used in these other locations. This is really important because access to these small loans has been known to be extremely helpful in cases of emergency. So what are the alternatives that one can turn to?
There are alternatives that borrowers can turn to, and they include small loans, microloans, credit cards, and consumer loans. Stay with us as we discuss these alternatives.
This type of loan is under the broad category of consumer loans. Listed below are some of the features: –
- Borrower can access up to NOK 600,000
- No security is required.
- Can be used for any purpose.
- Repayment period can be up to 5 years.
- The average interest rate is 15%
These are loans with a low credit limit, high-interest rate, and short repayment duration. The features are summarized as follows: –
- Borrower can get up to NOK 70,000 but in some cases can be as high as NOK100,000.
- The effective interest rate starts from 20%
- Though short-term, the repayment period depends on the amount of loan taken.
- The duration for the loan repayment cannot be more than 5 years.
- Does not require any collateral.
- Can be used as desired.
A credit card is a slim plastic or metal card that is used for the purchase of goods and payment for service. This instrument is issued by a financial institution with a credit limit based on certain criteria. Below are the features: –
- Credit limit is from NOK 1,000 to as high as NOK 150,000.
- The average interest rate is 20%
- Repayment period is up to 5 years.
- Gives the holder access to rewards such as bonuses or discounts.
- Can be used for financial transactions online and offline.
The major thing about this loan is the low credit limit that is available to the borrower. Its features include the following: –
- Amount that’s usually approved ranges from NOK 1,000 to NOK 20,000
- The effective interest ranges from 200% to 300%
- It is the closest alternative to SMS loans.
- Comes with a maximum repayment period of 12 months.
- Does not require any collateral.
- Can be used for any purpose.
Know more about microloans at this link – https://www.entrepreneur.com/money-finance/business-microloans/52724
The ban on SMS loans in Norway was in the best interest of the citizenry. The government noticed the increase in the number of defaults and how consumers were ‘defrauded’ through the exorbitant interest rates that lenders charged. So, they came up with regulations that protected the interest of the consumer.
In this article, we have spent some time discussing this subject, looking at a few issues surrounding it, and sharing alternatives that customers can explore. We believe that the information shared here will come in handy for those seeking an SMS loan. Bear them in mind so that you would not run afoul of the law whenever you are in Norway.