The market for quick loans, what now?
The market for mortgage loans has come under pressure after the government, in May this year, introduced a 48-hour report period. Many Danes otherwise considered the fast payment as one of the benefits of quick loans.
The market for mortgage loans has otherwise been developing rapidly over the past few years.
Since 2010, the number of quick loans has exploded. In 2010, 20,384 loans were issued. In 2015, the number of loans had increased to 172,485.
However, there are many who default on their quick loans. According to the Consumer Ombudsman, as many as 12.1% of all mortgage loans were defaulted in 2015. Those who had the most difficulty in meeting the payment period were in the 25-29 age group, with 13% defaulting on their mortgage loans.
The report time of 48 hours is introduced as many consumers are in financial difficulties. According to a survey conducted by the Competition and Consumer Agency, more than 40% of consumers who took out a quick loan in 2014 subsequently regretted.
The same survey also shows that almost 40% of consumers responded that the loan was more expensive than expected. More than half of the respondents did not consider other alternatives until they took the quick loan.
The reporting period deals with short-term consumer loans ie. consumer loans with a maximum maturity of three months. However, this does not apply to credit agreements concluded with a bank.
In May 2015, the Competition and Consumer Agency published a report on the market for mortgage loans, in which they had a recommendation for a period of 48 hours. The reporting period should make consumers think better before finally taking out a quick loan. The proposed bill means that a compulsory 48-hour break can be introduced before the loan can be finally approved.
Fewer have to take out a quick loan
But what do these legislative changes mean for the mortgage market and these loan providers? The purpose of this bill is to hope that fewer consumers choose to take out quick loans.
In the infographic below we can see that the period from 2010 – 2015 the total loan amount has increased by DKK 490 million. At the same time, the number of loans issued has increased by 746%. In addition, the average loan amount has also increased by DKK 1,255. We can therefore see that the Danes borrow more and more often. The hope of this 48-hour report period, which will be introduced on January 1, 2017, is that the Danes will consider other alternatives before taking out a quick loan.
An alternative to Gowls loans could be consumer loans.
We may risk that these loans disappear completely. Consumers may want to think better before taking out a Kvik loan, so it is no longer 40% of consumers who regret having taken out a Kvik loan. Consumers may want to consider other alternatives so that one can think carefully about whether one can actually afford to take out a quick loan. But at present, no one knows what is going to happen. We can only guess what the impact the bill will have on the mortgage loan market.
Nordea’s consumer economist Ann Lehmann Erichsen has stated to Jinkolske ” If you are one of those who take out quick loans in the evening and night hours, then it makes good sense with a” think-about-clause “, because then it could very well be that this loan will not be completed the next morning, once your common sense is restored “.