- The payday loans market has grown significantly, reaching $ 128.5 billion in the first four months of the year, an increase of 58 percent.
- According to Rotate Bank, the majority of new payday loans, about 73 percent, have a fixed repayment period for more than one year.
- payday loans with a fixed repayment period of more than 1 year are more predictable than their variable rate counterparts.
- There are significant differences in the market: payday loans with a fixed repayment installment of $ 1.5 million for 5 years can be more than $ 10 thousand a month.
Payday loans market
The payday loans market has been on a steep upward trend for a long time, and this year has also started to expand. The popularity of payday loans can be explained, inter alia, by the fact that they have partly taken over the role of previously popular free-to-use mortgages. On the one hand, because interest rates on payday loans have dropped significantly, and on the other hand, they are much easier to apply for than mortgages, and borrowing costs are lower for payday loans because of no valuation, notarial deed or mortgage registration.
Banks signed new payday loan agreements
In the first four months of the year, banks signed new payday loan agreements worth $ 12.8,5 billion, a 58% year-on-year increase. It is also important that in addition to the growth, the majority of payday loans with a fixed installment for more than 1 year providing a predictable repayment installment, according to Rotate Bank’s latest compilation of official data. The amount of payday loans with fixed repayment installments for more than 1 year exceeded $ 93 billion, thus they accounted for 73% of new loans. And the percentage of payday loans with a fixed installment of at least one year or up to 5 years was 27 percent.
Erika Calces, the Rotate Bank expert said. Valid “seen in housing loans tendency market for payday loans That latter also providing predictable monthly installment fixed-rate loans are the majority of fixed-rate loans to the advantage of the period of fixation the same amount will be the installment. even if the interest rate environment changes in the meantime. Therefore, in the event of a potential interest rate increase, the installments on variable-rate payday loans may increase, but not on fixed-rate loans. ” He added that payday loans have a typical maturity of 3-5 years, so it is worth fixing the interest rate for the whole period, because only in this case can borrowers be sure.
Rotate Bank’s analysis also shows that among the five-year fixed-term and 5-year $ 1.5 million payday loans, the cheapest ones can be applied for at the beginning of June, with a full APR of between 6 and 7 percent, It means. However, the thm of the most expensive constructions can exceed 20 percent, which means more than 40,000 forints per month. Due to the significant differences, according to Rotate Bank, it is worth looking at the offers of as many banks as this can save borrowers up to half a million forints.