A cornerstone of the High-Cost Credit Act is the interest rate ceiling. Since the law was introduced, a high-cost credit must not have a higher nominal interest rate than about 40%.
It can be compared to interest rates of several hundred percent that some companies had before the law came into force. But how much has the interest rate ceiling affected the cost of the loans?
The loans have become 5 – 10% cheaper
One goal of the interest rate ceiling was for the loan companies to earn less on the loans that were granted, thus they would have to make a harder credit assessment and thus allow fewer people to borrow money.
One idea was that the interest rate ceiling would result in lenders not being able to offset unpaid debts with high interest rates. The business model with extensions thus became impossible.
Bigger differences on larger loans – at least in kronor and the penny
Therefore, no major differences can be seen in the loans where the repayment is due within one month. Because even though interest rates have been significantly lowered in some companies, there will not be large sums.
Although the effective interest rate has been lowered by several hundred percent on certain loans, this has meant some hundred (if even that) difference.
The effective interest rate has more than halved. The total cost of the loan has decreased by about 10%.
Not the interest rate that changed the most
The interest rate has changed at a large number of sms loan companies. This is because the limit today is just under 40% in nominal interest rates. In the past, there were several that had several hundred percent interest. However, as shown above, this change in interest rates has not made such a big difference. This is in many cases a change of around 5-10%.
Of course, it seems that the changes that have taken place are relatively small. Borrowing costs have decreased by 5-10% for the borrowers who handle their payments, which sounds like a small difference in relation to the work done.
It is important to point out, then, that the changes in the layout make it impossible for the same aggressive cost development that could hit (and more or less utilized in previous business models) the most economically weak. As mentioned before, extensions could be used as a lure in marketing for those who had the worst financials.
The revenue generated by the extensions created extremely good margins
The loan companies could now take a higher risk. After all, the new model has, in addition to the 5% -10% cheaper loans, also led to a less aggressive cost trend for borrowers with the worst economy who could easily easily end up in a vicious circle of extensions where the loan was never repaid – instead, each payment was a pure interest expense.
Many have probably missed that this was the really big difference between the previous SMS loans and other types of unsecured loans.