Often, sms and fast loans are used as synonyms for high-cost credits, but that is not true. All sms and fast loans are not high-cost credits. Here at Happylend, for example, you will find 20 fast loans that are not and most of these loans have an interest rate between about 10.00 – 29.95%.
This is a high cost credit
In order for a quick loan to be classified as a high-cost credit, the loan must have an annual interest rate of 30 – 40% plus the reference rate. Since the reference rate is 0% at present, it simply means that a loan that currently has an interest rate of 30 – 40% is a high cost credit while all other sms and fast loans are not. In addition, since July 1, 2019, all credits that have an interest rate of 30% or higher must also have a warning triangle that clearly shows that these are high-cost credits.
That’s why people take high-cost credits
If there are now fast loans that have an interest rate of 10.00 – 29.95%, why are so many people taking loans that have an interest rate of about 39% (which is the most common annual interest rate for high-cost loans)? You should get that answer now.
You let go of UC
Almost no lenders offering high-cost credits take their credit information from UC, while those who offer cheaper fast loans usually do. We at Happylend believe that this is the single biggest reason why people choose a more expensive quick loan instead of a cheap one. Why people often prefer to take a quick loan from a lender who does not take UC, you can read about our page where we list 31 loans without UC.
It goes faster
Most mortgages and fast loans with an interest rate below 30% of the not end up in your bank account as quickly as a high-cost credit does. Only three out of seventeen lenders can make direct transfers to the borrower’s bank account, while it usually takes up to 24 hours for the money to end up in the borrower’s bank account with other credit companies.
If you want to take a high-cost credit instead, there are 15 credit companies to choose from if you want to get your money right away. That is quite a difference and is probably also an important reason why people choose a high cost credit.
However, you should keep in mind that some credit companies only make direct transfers to a single bank while others make it to four, maybe even five banks. Thus, it is not certain that all lenders make direct transfers to your particular bank and therefore it may be good to have more lenders to choose from if you are in a hurry with the money.
Often easier to be granted
In general, it is somewhat easier to get granted when applying for a high-cost credit, but there are certainly lenders that offer cheaper loans, which are also quite easy to get a loan from. Of the eight lenders that grant the most loans (in relation to applications) here at Happylend, only two are offering an interest rate below 30%. It speaks its clear language.
If you have payment notes, there are more lenders to choose from if you intend to pay over 30% in interest, not least if you want a fast loan, but after all there are quite a few credit companies that offer cheaper loans and who still accept payment notes. Unfortunately, most of them take UC and it may not feel so good if you get a rejection and also have remarks.
So which one to choose?
Which loan you should choose depends of course on your own circumstances and wishes.
If you can think of UC, do not need money at once and have a decent credit rating, you should of course apply for a loan that has an interest rate below 30%. Yes, then you should rather apply for a regular private loan that has an interest rate below 10%, not least if you intend to take a slightly larger loan and get a longer repayment period.
If you want to get rid of UC, get your money at once and have half a credit rating, maybe a high-cost credit is the choice for you, but still start by testing applying with one of the few lenders that offer cheaper loans and do not take UC. You lose nothing at all, hardly even time because you often get a quick answer.
We at Happylend do not recommend that you take a high-cost credit if you intend to borrow a slightly larger sum for a longer period, for example USD 20,000 and repay it for 1 year because it becomes way too expensive. This can give a loan cost of USD 5000 – 6000. But if you are only planning to borrow type USD 3000 and plan to repay it in maybe 2 months, a quick loan with an interest rate of about 39% could be an alternative. Then the loan does not have to cost more than about USD 500 and it may be okay.
If you were to take a high-cost credit with flexible repayment, ie an online credit with an interest rate above 30%, you should not be tempted to repay as little as possible each month but instead repay what you borrowed at a very fast rate , otherwise it will be very expensive.