The history of the sms loan

In recent years there has been a lot of talk about sms, or fast loans, as if it were a whole new phenomenon but it is not. Certainly, sms appeared on the market only in 2006, but the history of fast loans goes all the way back to the 19th century outside the country. Here you should take a closer look at the history of the sms loan, which may be of interest to you who are interested in the phenomenon.

SMS loan’s first predecessor in the US

SMS loan

Already at the end of the 19th century, loans that were not offered by the banks appeared on the US market, which became the precursor to Payday loans in the USA. The principle of these loans was simple: people had to take out a small loan that would be repaid when the borrower received his salary. For it was not so easy for people to get open bank accounts in the US in the late 1800s and it was almost impossible to get a credit from the bank, which is why these loans appeared on the market.

But everything didn’t go so well at that time. Firstly, these loans were illegal, although the authorities did nothing to stop them, and secondly, the debts could be forced with force and threat if they were not repaid on time. In any case, the authorities looked between their fingers when it came to these loans, as they helped millions of Americans get through tough times.

During the first half of the 20th century, these small loans with short maturities became legal, but when the US introduced strict laws in the 1940s and 50s on how high interest rates the loan companies could take, a large part of the market became illegal again . It was also not possible to lend type 100 dollars for a week and take 6% in effective interest rates (which was the maximum interest rate in New York, for example) for that. It was simply not profitable with such small short loans.

Check cashing loan

Check cashing loan

In 1959, so-called check cashing loans appeared for the first time in the United States. Then the Senate approved that small quick loans should be taken by people who were bankrupt, had poor credit rating and so on until the next salary, ie people who were not creditworthy in the eyes of the banks. Yes, it is somewhat reminiscent of what it looks like in the country today. Many who do not receive a bank loan take a sms loan instead. Sure, there are people who should definitely not get a loan from the bank, but on the other hand, the banks are a bit picky sometimes which forces people to turn elsewhere.

Payday Loan

Payday Loan

During the second half of the 1990s and in the 2000s, lending of the small fast loans increased in avalanches in the United States, partly because in 1996 the Senate approved so- called Payday loans that could be lent to all people (not just to those who had a hard time financially), partly because people could make their application via text message and online which was very smooth.

Initially, the loans were repaid by the lender withdrawing the money directly from the borrower’s bank account as soon as the salary was deposited into the account, but that too has generally changed in the USA. Payday loans in the USA today are basically the same as what we call sms and fast loans in the country nowadays.

The sms loan comes to the country

The sms loan comes to the country

In 2006, the first sms loan appeared in the country. At the very beginning, you could not borrow more than USD 3000, which would be repaid within a short time, but soon the sms loans became larger and the maturities longer. Since then, the sms industry has grown an avalanche.

The reason for the loan being called just “sms loan” was because they applied for the loan via sms, but soon it became more common to apply for the loan on the lenders’ websites. It is much easier to search online than via sms because you then get all the info with all the conditions clearly stated in front of you when you make your application.