Loans by SMS: Have you heard of them?
SMS loans are a niche financial product. As the name suggests, customers apply for a loan via a text message sent to the direct lender, by sending a text message they give information that they are interested in this form of loan. If approved, a quick short-term loan will be deposited in the borrower’s bank account.
How do SMS loans work?
Before borrowers have the right to apply for a loan via a text message, they must first set up an account with the company. As part of the registration procedure, they must provide detailed information about their income and expenses so that the lender can assess the affordability of the loan. They will also receive a PIN code which they must use as proof of identity in all subsequent loan applications. Their account is linked to a mobile number and bank account. Customers must apply for the first loan online. After paying off the loan, they can use the SMS borrowing service.
The main benefit is the speed of the loan application and its approval. The SMS can be sent in a few seconds. After approval, funds are transferred to your account almost immediately during normal business hours.
In addition, many people like this type of loan because they provide borrowers with or without a low credit history. However, keep in mind that all lenders must carry out some form of credit check, otherwise they are not acting in accordance with the law. In addition, many online lenders now also offer credit loans in the same way, so you can try this option before you decide to get loans without checking your creditworthiness. If you want to know where to get an SMS loan – information is easily available.
The speed of the sms loan application can be a double-edged sword. While this is undoubtedly quick, it can also encourage borrowers to impulsively apply for a loan without thinking about it. Easy access to credit often makes them happy and less likely to develop budgeting skills because they know they have a loan to pay back.
High interest rates are another disadvantage of these loans. Repeated use of sms loans can worsen the financial situation of borrowers, and the additional fees associated with the loan reduce the amount of money remaining at the end of the month. That means they have to borrow a larger sum the next month to get out of it somehow. Such people can have serious debt problems that get out of hand.
SMS loans are very quick to obtain, which can create the risk of irresponsible use.
How are text loans comparable with payday loans?
SMS loans are often referred to as payday loans of a new nature. Both must, however, be licensed and regulated and must comply with their rules on consumer credit. Both options have very similar loan terms and usually have to be repaid within 7-45 days.