Dutch consumers have a new way to take out loans: by SMS. Finnish Ferratum just launched its short-loan service in the Netherlands. Customers can borrow EUR 100, 200 or 300 for a term of 15 days, by texting Ferratum their name, date of birth, bank account and address. If they've pre-registered, the money is in their bank account within 10 minutes. First-time customers have to wait 24 hours. Speedy loans come at a cost: Ferratum charges a hefty 25% processing fee. Which means that consumers who borrow EUR 300 today, owe the company EUR 375 in 15 days time.
In Sweden, Estonia and Finland, where a handful of companies have started offering similar services over the past year, ombudsmen have been pushing for regulation. While critics claim that it's unwise to offer people such effortless methods of sinking (further) into debt, one could also argue that consumers should be able to choose whichever form of credit works best for them. Though the rates smell of shark, the concept is definitely quick and easy ;-) One to look into if you're in financial services or telecom. And for those of you seeking an antidote to fast credit: layaway is back.
Website: www.ferratum.nl
Contact: klantenservice@ferratum.nl
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Hi Charles!
That is indeed possible at least here in Finland and apparently in Netherlands too. Our banking system is quite advanced compared to many large "banking nations". I guess Ferratum has also made some kind of agreement with banks to transfer money immediately when needed. However, interest rate for this kind of loan is around 300% per annum, not very close to normal loan rates, but that doesn't seem to bother customers at all.. I would highly recommend this idea.
Wow, then our us banks suck. :(
What a terrible idea! Anyone who needs cash that badly and quickly is not going to be in a position to pay back such an exorbitant interest rate!
A really nice idea. I wonder if it will work in India.
What do you, folks, think about the 25% interest rate charged for 2 weeks? I am curious what the bank's profit margin is.
Praveen, also I am curious whether it will work in India. Are there a lot of credit agencies in India? I presume that this is a prerequisite for this type of banking..... as banks make their decisions on someone's credit history.
1
In the case of a default or late payment, what will the customers be subjected to? If the interest is going to be cumulative or compounded, it will definitely smell like a shark. Are there stringent credit assessments in place?
In the case of late payment the customers will be subject to a collection fee plus the costs associated with a legal procedure. Interest charged will be the contractual rate as defined in the terms and conditions that are available on the website.
This sounds like a good idea but how do they collect the money back?
SMS-loans are under all criticism in Sweden as the number of cases at the Swedish Enforcement Agency (Kronofogden) has skyrocketed because teenagers haven't been able to repay their loans. Also, the effective interest rates can be very high, up to 800 percent. Not really innovative if you ask me.
How they check Customers credit history?
How is it possible that they can deposit funds within 10 minutes time in a customer’s bank account? Is that even possible?
Charles Polanco | August 26, 2007 5:52 PM