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Payday Loans in Finland Compared to UK Payday loans

Payday Loans in Finland Compared to UK Payday loans

- by Isla Williams

Payday Loans around the World – Chapter Two

Cashfloat went to compare the instant payday loans industry in the UK to payday loans in Finland. Payday loans are very popular among the Finns. One of the most preferred loans in Finland is the payday loan. They also refer to these loans as quick loans. Quick loans seem to be the most appropriate answer to an instant financial crisis.

Cashfloat explore payday loans in Finland.

How do Payday loans UK compare to Payday Loans in Finland?

Payday loans Finland Payday loans UK
Average Short term loan taken €229 £260
Average loan period 32 days 22 days
Average charge €25 for €100 £24 for £100

Finland Payday Loan Industry and Market Research

Payday loans in Finland are legal. Euroloan Group refers to payday loans as a loan with credit capital of less than €250 and a repayment period of less than one month. Research in 2012 by Statistics Finland showed that the average short term loan is €229 and the average repayment period is 32 days. The majority of the people that take payday loans in Finland are ordinary working people over 35 years of age.

In 2012 a report from Euroloan Group was released, showing result from research that was done on payday lending in Finland. The report shows that according to the Statistics Finland, the average charge for €100 is €25. Euroloan takes another source, the Finnish Consumer Protection Act that says that the APR (annual percentage rate) for a €100 loan, with a repayment period of 30 days is no less than 1411%. According to statistics made by Suomen Asiakastieto, only 5% of new payment default entries were a direct result of taking short term loans. Only 1% of people who have payment default entries on their credit history have entries solely caused by taking short term loans. Payday loans are the cause for big debt problems. The increase in the total number of payday loans causes some congestion in courts. Reports from Statistics Finland shows that in the third quarter of 2011 alone, over 350,000 short term loans were granted; that means an annual increase of 35%. Some loans cannot be recovered without court proceedings.

Finland flag

Will Disallowing Payday Loans Get Rid of Their Need?

Regarding the question “will limiting the availability of payday loans shorten their usage?” Euroloan Group says the answer is no – limiting the availability of payday loans does not eliminate the demand for these types of loans. On the contrary, it directs people towards larger and longer loans and encourages looking for other loans from the grey market or from Foreign Service providers that don’t follow domestic regulations. As Euroloan Group states, rather than removing the problem, this would just make it worse. Lenders must always do their best to ascertain the creditworthiness of their customers. It is neither in the lender’s nor the borrower’s interest if the customer is struggling to pay the loan back.

Euroloan Group suggests some solutions for this problem. The first is a general credit register. As an example, in Sweden, the use of more extensive credit information has significantly reduced the number of consumers running into debt. It has also lowered credit losses for lenders and incised price competition. Another solution is increasing regulation, self-regulation and centralized market supervision under the Finnish Financial Supervisory Authority. A third solution would be to increase competition i.e. ensuring a sufficient number of reliable operators. The last possible solution that Euroloan Group suggests, is ensuring a stable regulatory and operating environment with clear norms. In an unpredictable environment, prices may stay high. So reducing lenders’ risk will lower consumer prices through increased competition.

According to Statistics Finland, nearly €300 million are granted in short term loans during the previous four quarters. A full ban on short term loans would lead customers toward the grey market or foreign services providers that aren’t under even the nominal control of local Finnish authorities.



Competition for Payday Loans in Finland

We did some research comparing quick loans in different companies that provide payday loans in Finland. We found that a majority of the companies offer loans similar to quick loans. Companies offer consumer credit, flexible loans and credit accounts, business loans, loan brokerage services, etc. Our first source was Luottokeidas.net. There we found various companies that service customers with quick loans.

Name Loan amount Loan Duration Age limit
Ferratum Min €50 Max €300 7-30 days 21 years
Vivus Min €10 Max €2010 3-30 days 20 years
Luttoraha Min €50 Max €2000 45 days 22 years
Ekstraluotto Min €10 Max €2100 1-26 months 21 years
Ainalaina Min €50 Max €2000 45 days 21 years
Euroloan Group Up to €500 3 months-3 years 20 years
Everyday.fi Min €20 Max €2000 3 months-1 year 21 years
Compare to payday loans in the UK
Cashfloat Min £200 Max £1100 1-4 months 18 years
  • Ferratum quick loan is part of a Ferratum Corporation and it is listed on the Frankfurt Stock Exchange. It is Finnish financial institution with simple goal, to offer more than money to everyone. With headquarters in Finland, it operates in other 21 countries including Germany, France, Croatia, Romania etc.
    • Loan amount: minimum €50, maximum €300.
    • Loan duration: from 7 days up to 30 days. Ferratum is interest free, so the annual interest rate is 0,0%.
    • Age limit for taking a loan: 21 years old.
  • Vivus has offices for payday loans in Finland, Sweden, Denmark, Latvia, Poland and UK. It started operating in 2009.
    • Loan amount: minimum €10 and €2010 maximum.
    • Loan duration: 3 to 30 days.
    • For 10 up to €400, annual interest is 0%.
    • For 10 up to €2010, the annual percentage rate in €2000 is 447.6%.
    • Age limit for taking a loan: 20 years old.

Our second source was Lainaa which revealed various other companies offering quick loan services.

  • Luttoraha – is a Finnish private limited liability company specializing in consumer credit. They have experience in the granting of consumer credit in the Nordic countries since 2005.
    • Loan amount: from €50 to €2000.
    • Loan duration: 45 days.
    • After paying back the loan, borrowers can use more.
    • It gives free security application to everyday life.
    • The APR of €2000 credit is calculated on 140.4%.
    • Age limit for taking a loan: 20 years old.
  • Ekstraluotto – is a reliable lending company since 2006.
    • Loan amount: from €10 to €2100.
    • Payback period: from 1 to 26 months.
    • On a €2000 loan for 12 months payment, the APR is 119.86%.
    • Age limit for taking a loan: 21 years old.
  • Ainalaina – recognize the €2,000 line of credit for more than 21 years of age.
    • Loan amount: from €50 to €2000.
    • Loan duration: 45 days.
    • Borrowers can raise money by text message 24/7.
    • Customers service available 24 hours a day.

Because we couldn’t find more sources about competition for payday loans in Finland, we have expanded the research on higher amount of credits over periods of several months. According to our other source, Parasvippi, there are 9 companies offering different amount of loans which are listed and explored below.

  • Eurolan Group – is a company with consumer finance options in Finland, Sweden and Poland. For Finland, it offers express loans for up to €500. Here are the key characteristics:
    • Loan Duration: min 3 months, max 3 years.
    • APR (annual) 50.5%.
    • Nominal interest rate is 4.99%.
    • Loan example: For a loan of €100 for 3 months, the borrower needs to pay €47 monthly installments, or €139 in total. This makes a fee of €39.
    • Age limit for taking a loan: Above 20 years old.
  • Eurolimitti – Eurolimitti is a brand of JW-Group Ltd which operates since 2006 as entirely Finnish-owned finance company.
    • The least amount they offer is €10 with maximum amount of €3000.
    • APR (annual) 98.68%
    • Nominal interest rate is 5.99%.
    • Loan example: For a loan of €100 for 3 months, the borrower must pay €37 in monthly installments or €112 in total. This makes a fee of €12.
    • Age limit for taking a loan: 21 years old.
  • Laina – is Finland’s leading company for different kind of loans. Flexible financial services are already used by more than 400,000 Finns.
    • Loan duration: min 3 months, max 3 years.
    • APR (annual) maximum 77.16%.
    • Loan example: For a loan of €100 for 3 months, the borrower needs to pay €40 monthly installments, or €121 in total. This makes a fee of €21.
  • NordCREDIT – is another Finish credit company that offers multiple kind of credits, including short term loans online.
    • Minimum amount of loan is €100 and maximum is €3000.
    • Loan Duration: min 3 months, max 1 year.
    • APR calculated to the average of €2000 for 12 month payment period is 128.80% and the total cost is €3255.
    • Annual nominal interest rate is 60%.
  • Everyday.fi is a flexible credit that provides free access to €2000 without a fixed annual fee or other hidden costs. Everyday.fi offers mobile application for iOS and Android, by sending SMS text and by OPR Online Service.
    • Loan duration: min 3 months, max 1 year.
    • The least amount they offer is €20 with maximum amount of €2000.
    • Withdrawal commission of 15% with monthly interest rate of 5% and no other charges.
    • APR for a typical €800 is 99.69%.
    • Age limit for taking a loan: 21 years old.
  • OK Money is Finnish credit provider and award winning for several years as the best small loan company.
    • Loan Duration: 3 months to 2 years.
    • The cost for a €100 loan for 90 days is €29, which means the fee is €29.
    • Annual interest rate is 376.68%.
    • Age limit for taking a loan: 20 years old.
  • Soumilimiitti is a brand of JW-Group Oy. It offers up to €2000.
    • It offers minimum €10 and maximum €2000.
    • Withdrawal commission is 15% of the raised amount.
    • Loan duration: min 3 months, max 1 year.
    • The cost for a €100 loan for 90 days is €33, which means the fee is €33.
    • The annual interest rate is 477.6%.
    • The APR on credit of €800 for 12 month payment period is 163.98%.
  • Euro24 – The company’s main business is financing and the granting of consumer credit. Euro24 Finance Ltd is registered in the Southern Finland Regional State Administrative Agency creditor register from 31.1.2011.
    • Loan Duration: min 3 months, max 2 years.
    • The cost for a €100 loan for 90 days is €52, which means the fee is €52.
    • Annual interest rate is 1254.79%.
    • Loan example: for €800 the APR will be 98.87% for a repayment period of 1 year. The amount of total cost of the loan will be €2086.
    • Age limit for taking a loan: 21 years old.
Cashfloat compare payday loans in Finland.

Regulations for Payday Loans in Finland

According to a Uutiset article, in June 2013 the Parliament in Finland introduced a new legislation the instant loans. The legislation stated that it will cap interest rates on payday loans, making the enterprises unprofitable for businesses in the sector. In some cases, quick loan companies have quit the business and in other new regulations-compliant loan products were on offer. In that time, quick loans were double-edged swords in the Finnish financial landscape. On one hand, these loans helped many people to solve some financial problems. On the other hand, extortionate interest rates had many borrowers facing the bad prospect of debt collectors and further financial problems. At that time the Finnish Small Loans Association were speculating that loan providers may bring new regulation-compliant products to the market. That year 350,000 short term, high-interest loans, worth €96 million were taken out in Finland. In 2014 just 69,000 loans worth €44 million were made over the same period. The amount borrowed continued to grow from €275 on average to €638. While before payday loan rates could be well over 100%, now companies can charge a maximum annual rate of 50% on top of the reference rate.

As these politics were introduced in 2013, payday loans in Finland were in effect banned by introducing maximum interest rates, banning text messages for requesting payday loans and mandating more thorough background checks on borrowers. The Helsinki University’s Institute of Criminology and Legal Policy studied nearly 2000 debt judgments from 2012 to 2014. With their research, they came to a conclusion that the reforms in 2013 brought a reduction in the number of debt cases among young people aged 18-34.

Sources

  • https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=489084&messageId=598765
  • http://www.lainaa–heti.fi/
  • http://www.parasvippi.net/
  • http://yle.fi/uutiset/quick_loan_credit_set_to_dry_up_with_new_law/6662995
  • http://yle.fi/uutiset/payday_loans_collapse_after_interest_cap/7331373
  • http://yle.fi/uutiset/payday_loan_regulation_reduces_young_peoples_debt_problems/8617971
    • Caribbean born Isla Williams is excited to join the Western Circle Educational channel team. A born writer, Isla had her first article published at age 9 in a local magazine. Isla’s joy emerges when pen strikes paper, and she can tap into her creative self. “I love to share knowledge/information and help others to be in the know while being as friendly as I can.” Isla is an accountant by profession but has taken a break to do what she enjoys most. Mother nature is her best friend, especially when the Sun is shining. A keen surfer in her youth, Isla looks forward to those rare trips home where she joins her family and hits the waves.
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