On July 30, 2019 by Kenneth Cobb

It sometimes happens: it raises a completely unplanned expense. The dishwasher breaks down, those just-must-have jeans are suddenly on sale, or it’s simply too much month left at the end of pay.

Obviously it can be tempting in such situations to take SMS loans.

There are many lenders in the market and many of them do not care if you have payment notes.

But one important reason why there are so many lenders is that they make big money on their business.
And the one who pays is you – if you choose to borrow from them.

When you take out SMS loans it is usually about small sums, from a few thousand to up to five thousand dollar.

It is simple and easy, often you get the money within a few hours. 

It is common for sms loans to be said to be “interest free”, but in reality this is not true. The lenders charge fees of several hundred dollar for each loan, which makes the effective interest rate very high.

According to the Swedish Consumer Agency and most lenders, the fees charged may correspond to an effective annual interest rate of 700-800%, in some cases even higher. The highest reported effective interest rate on a sms loan in Sweden is 75 862% and was taken out by HTO Finansiering, which works among other things under the brand “LuckyLoan” (source Wikipedia).

In addition, the loan will often be repaid within a month, and it is not certain that you have managed your finances in such a short time. It is therefore not uncommon for people to take new SMS loans to repay the old ones. It will be a vicious circle that can be difficult to get out of. SMS loans are not a good idea. But what can you do instead when the need arises? Here are some concrete tips:

Yes that jacket is super nice. But what’s wrong with the one you bought last year?

It may be able to hang on for another season – so you won’t have to waste money you don’t really have.

Does the roof leak? Some expenses cannot be avoided or postponed.
Look at what you can sell to get money to pay for the necessary. Clothes, electronics, furniture – at Tradera and Blocket you can quickly turn things you don’t really need to make money into. And do a wind purge. Many have forgotten treasures in the stores.

Has the washing machine been broken? Check with your neighbor if you are allowed to wash there until you have been able to save for repair or a new washing machine.
Borrow things, clothes and tools from friends and family. Co-operation with the work mates. Avoid spending money on things that you can otherwise solve, and wait for your purchases until your finances manage.

If you have SMS loans, be sure to collect them from a lender, then you can lower your monthly costs substantially. Snowball helps you collect your loans free of charge.

Review income and expenses, loans and savings.

By providing an overview you can easily see where the money is going and what you could save on. Tink is an app that helps you keep track of how much you spend on different things.

If you don’t already have a savings, get started. Even if you can’t afford to spend more than a hundred bucks a month, it’s very worthwhile to do so. After a while, those small sums have become quite a lot of money – good to have when the next unforeseen expense comes.