Sms loans vs private loans in practice

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Many people believe and think that sms loans are just bad throughout. You hear scandals like usury rates, debt trap and the like. Sms loans clearly have a bad reputation and therefore it is often the case that you rate the loan without even considering it as an alternative. But is it really that bad if you count on it?

The idea with a fast loan, sms loan or micro loan (all of which are the same) is that you should be able to borrow a smaller amount such as SEK 500 to about SEK 10,000 for a shorter period. Thus, it is a loan for someone who needs a little less supplement in the cash register for a shorter time.

The Idea and Basic Concept are Quite Good but the Problem is Mainly that it is a Little Expensive

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The question, however, is whether it is more expensive than the closest alternative when it comes to loans. If you do not want to take a sms loan then you have to take a regular private loan, where the shortest possible term is one year. This means that if you want to avoid sms loans and take another, more “respectable” loan then you have to borrow the money for a whole year, even if you really only need them for one or two months.

You are often told that sms loans are very expensive and that they run with low interest rates, and it is also very often that you see very high interest rates for sms loans. This is especially true of the effective interest rate. The reason for this is largely that the effective interest rate is calculated for a full year and if you have a loan of only a few months then the calculation becomes a bit strange. This means that the effective interest rate is also really high.

If you look past the high interest rate on the paper and look at what it can cost in practice when you take different loans, you see that it is actually not so dangerous anyway, for certain amounts and situations. Sms loans are clearly not cheap and you should not borrow unnecessarily, but it is not at all certain that it is more expensive with a sms loan than to take a regular private loan at the same amount.


The three major reasons why a private loan can be at least as expensive are the following;

  • The maturity is one year instead of one or two months, so you have to pay interest for a clearly longer period. Longer period means higher total interest expense and you get to pay for months you don’t really need.

  • Private loans usually have setup fees and these are a bit more expensive. Even sms loans may have setup fees, but they are often not as large. Nor is it unusual that they have no such charge at all.

  • Private loans also often have payment fees that must be paid each month (which can sometimes be avoided by choosing eg direct debit but sometimes it is compulsory). In addition, when the loan is 12 months, there will be quite a few fees to pay.

Is a sms loan really preferable to a regular private loan?

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Not too many banks and lenders offer private loans that have as small loan amounts as those that can be taken via sms loans. If you want to borrow, for example, SEK 1 – 3000 then it is very difficult to find a lender at all. For SEK 5,000 there are some lenders, but you have to get up to SEK 10,000 to start finding some more. Not even then is it really particularly common. The big banks usually start at SEK 20,000 or SEK 30,000.

Another problem (if you want to call it that) with ordinary big lenders is that they do not want you to borrow the smallest amounts and if you do now you often get a high interest rate. The interest rate sets most lenders individually for private loans, which means you can get an interest rate within a certain range. Maybe that range is 5 – 22 percent or something similar.

The better finances you have, the lower the interest rate you can get, but it is also the case that the size and maturity of the loan affect. A large long-term loan gives you better interest rates because that’s what the banks want. A really small amount with the shortest maturity will give you a high interest rate. For that reason, you can always count on getting a pretty bad deal for this type of loan and that means that regular home loans don’t necessarily stand up well to sms on small loan amounts.

Fees such as a setup fee and a charge also come into play as these are usually larger and in total cost more than taking a sms loan for a couple of months. However, you can borrow the money for a longer period when you take a regular private loan and the advantage for you is that each monthly payment becomes less. But since you have your loan for a longer period, it is therefore not certain that the total cost will be lower.

Our calculation example shows interesting results

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We have done a couple of calculation examples to illustrate what the reality looks like when you borrow. These examples show that it can be quite equivalent to total costs for a loan of SEK 5,000 or SEK 10,000. We have selected some sms lenders at random but for the usual private loans we have simply found out some of the few who actually have these lower sums to offer.

The difference is that sms lenders have either 30 or 60 days maturity for these loans, while regular private loans are for 1 year or more. If you want to take out a private loan to avoid sms loans then you have to borrow for a long time, but sometimes you do not need to take the loan for such a long time and then maybe a sms loan can feel more logical.

Our example shows that a sms loan of SEK 5,000 for 30 days is usually cheaper than borrowing SEK 5,000 in the form of a regular private loan from a major lender. It should be said that only a few banks and major lenders offer as low as SEK 5,000, so the supply is very limited. The advantage of a private loan is that you do not have to pay as much per month, so if you have a limited economy it can still be an advantage. If you only borrow for 30 days then you must of course have all the money ready for payment of debt plus interest as early as next month.


For SEK 10,000, the prices are quite similar between sms loans and ordinary private loans, but then it is also calculated on 60 days maturity instead of 30 days for sms loans as it is a normal maturity for that loan amount. 60 days is normally a good bit more expensive than 30 days, which is logical given that you have twice the time to pay back the money, so you have to think about it when you look at the comparison.

A little more private loans offer SEK 10,000 as a loan amount, but the offer could still be called quite bad really. There are some sms loans that are cheaper than private loans and also the opposite on this loan amount. The advantage of private loans is still that you have longer time to repay the loan and that each monthly payment becomes clearly lower.

Lender loan Amount Term Total cost Uppläggn.avgift
customer Finance 5 000 kr 30 days 1000 kr 0 kr
Kredit365 5 000 kr 30 days 802 kr 350 kr
Monetti 5 000 kr 30 days 679 kr 350 kr
Bank Norwegian 5 000 kr 1 year 1 115 kr 399 kr
L`EASY 5 000 kr 1 year 1 311 kr 595 kr
Cash Buddy 5 000 kr 1 year 820 kr 0 kr
Meddelandelån 10 000 kr 60 days 1 900kr 0 kr
Monetti 10 000 kr 60 days 1 628 kr 350 kr
Risicum 10 000 kr 60 days 2 223 kr 400 kr
SevenDay 10 000 kr 1 year 1037 kr (1,557 kr) 495 kr
Nordea 10 000 kr 1 year 1 498 kr 525 kr
AxoFinans 10 000 kr 1 year 1 890 kr 495 kr
What then is the judgment if you summarize?

In summary, you can say that if you really only need to borrow for 30 or a maximum of 60 days and know that you have money to repay the loan after that time, then it might be better to have a sms loan than a private loan from a regular bank or major lenders. Do not count sms only because of its reputation.

The advantage of sms loans is that it is fast and easy to borrow and you can usually sign digitally and then get the money within a day. If you only need the money for a short time, that loan can cost as much as taking a private loan for a year. Of course, you get more time for the money, so to speak if you choose the private loan, but sometimes you don’t need more time.

If you still want to invest in a regular private loan then try to find a lender that has no setup fee and where you can avoid the charge by paying for example via direct debit or e-invoice. This does a great deal on the total cost as the interest rate is not so dangerous.

Last but not least, I want to strike a blow for credit cards as an alternative to sms loans when you only need a little extra money for a short time. Credit cards give you the opportunity for a standing credit that can be utilized at any time when needed, once you have been approved.

The good thing about credit cards is that most people offer interest-free periods if you pay back what you used on the next bill. You can get 30 or even up to 60 days interest free credit depending on when you choose to use the credit card.

The only thing you really need to pay for the credit card is the annual fee, as long as you take care of your repayments. However, I would like to raise a warning finger and say that it will be quite expensive if you do not pay on time and let the credit start to pay interest. Then it is not very affordable. But if you only use the card and pay within the interest-free period, it’s a great way to borrow small amounts.

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