Loan

Differences of Short-Term Loans Markets in Different Countries

Short-term loan is an amount of money provided by a lender to a borrower, under the condition that it will be returned with an interest within a certain timeframe.

Differences of Short-Term Loans Markets in Different Countries

The idea of providing money to other people and earning extra percentage is old but gold. Banks with credit cards occupy the market of large loans. However, there are also short-term offers from various lenders all around the globe. Today, we’re going to compare the most interesting countries with their local differences in short/small loan form. It’d take too much time to reveal all features so we want to focus on a few types and areas only.

Without further ado, let’s start!

Short-Term Loan Types Throughout the World

Obviously, to be able to distinguish the differences between loan types in various countries, it is needed to understand what short-term loans are. Further, we prepared the detailed answers to these questions right here.

To start with, a short-term loan is an amount of money provided by a lender to a borrower, under the condition that it will be returned with an interest within a certain timeframe. While different firms list different requirements, one year is the most popular upper time limit for short loans. Amounts may vary from pretty low sums of $100 to relatively significant amounts of $100,000 or more in dependance with the lender’s conditions, borrowers payment capabilities, and the country.

And, just like it functions with any kind of funds, lent money might be needed for a wide range of purposes: from personal to business needs.

To be more clear, the most popular types are as following:

  • Doorstep loan. The simplest form that provides for personal interaction with an agent. Individuals receive the entire lump sum from the company’s representative.
  • Invoice financing. A short-term offering for businessmen. It allows getting financial support by using the company’s receivables.
  • Merchant cash advance. It’s also a viable option for small businesses. An entrepreneur borrows money in advance and then pays the fee from each sale.
  • Payday loan. Here’s another type for individual lending. A customer gets money quickly and without verifications but has to return the loan at once at the next payday.
  • Vehicle/property loan. A form of secured loan that uses the borrower’s assets as collateral. Usually, it helps to get more money or better terms/conditions.

In the majority of countries, clients can access lending firms both offline and online. Thus, it’s easy to find the most convenient option for any case.

General Statistics on Loan Markets

Not only the national debt of various regions increases constantly but internal loan debts also accumulate in almost all countries now. For example, the total student loan debt in the USA is $1.56 trillion. We can only imagine the size of the global amount.

As for more detailed statistics, there’s a wonderful tool called IMF Data Mapper. It shows private loan debts as a percentage of the country’s GDP. Thus, the largest national ratio is in Luxembourg where loans make up 411%! Cyprus is the second with 323% and Hong Kong is the third with 302%. The Bahamas are in fourth place as they feature 290%. The lowest numbers are in South Sudan (1.39%), Afghanistan (3.11%), and DR Congo (5.09%).

Finally, let’s not forget about interest rates. The Global Interest Rate Monitor shows that four countries feature negative interest for their local loans: Switzerland (-0.75%), Denmark (-0.65%), Sweden (-0.25%), and Japan (-0.1%). Bulgaria and Euro Area overall have a 0% rate. Simultaneously, Argentina reports an insane 58% average interest while Turkey approaches 20% and Ukraine has 17%.

Thanks to Euro Area stats, we also can take a closer look at the shortest loans with repayment terms up to one year. Here, interest rates for consumer loans are the highest in Estonia and Latvia with 16.7% while Luxembourg has the lowest number – 1.92%. House loans’ interests of 3.08% are the highest in Greece and Ireland and the lowest in Finland (0.78%). Finally, all other loans feature the highest 5.71% rate in Greece and only 0.52% in France.

Local Differences

Two of the most popular types of loans are focused on ordinary people and students. The first option refers to payday loans with low requirements and relatively high-interest rates. The second one focuses on various conditions but only one purpose – education. Different countries organize these markets in different ways. Let’s look at them!

Payday Loans

The mechanism of payday offers is the same almost everywhere. A borrower should contact a lending company first, send an application with the required documents, receive money after approval, and return them within a repayment term. Often, the loan must be repaid as a lump sum quickly. As well, these packages feature low to moderate amounts and favorable conditions without strict checks.

Here are a few examples of regional differences:

  • The market experiences significant growth of short-term loans due to a large number of customers – people in need. There are hundreds of lenders called Non-Banking Finance Companies that issue high-interest loans.
  • In the country with a developed economy, payday loans aren’t extremely demanded but they exist. Offers vary from SEK 3,000 to SEK 10,000 and feature a repayment term of 30 days. Lending firms are reputable and trusted.
  • The Philippines. Similarly to India, here are a lot of people that want to get quick and easy money. However, in the Philippines, governmental lending services like SSS and GSIS play an important role and protect customers from loan sharks.
  • The UK. According to PWC, over 40% of youngsters apply for payday loans here. Amounts top up at £500 but may rise to £1,000. Interest rates can’t be higher than 0.8% per day and 100% in total. Loans in the UK are regulated by the FCA.
  • The USA. Being the homeland for payday offers, the USA hosts more than 22,000 lenders with the worth of $46 billion. 27 states allow payday loans, 9 support other short-term types while 14 prohibit them at all. People borrow money for recurrent expenses.

Student Loans

While this type isn’t a short-term one obligatory, it’s also interesting to look at national differences. Most often, student loans are provided for borrowers who want to cover their education costs, including tuition fees, rent, and so on.

Check the stories from different parts of the world:

  • The government provides interest-free financial help. Students can get two $5,000 loans, each per six months. The package is provided directly and without extra fees except for 20% initial charge.
  • Both federal and regional governmental bodies help students here. However, these offerings come at a certain yet low-interest rate. Plus, students with disabilities can apply for grants that cover the entire education costs.
  • Despite this country provides completely free college education for residents, they still can get loans. Students from low-income families are eligible to receive financial aid to cover travel or accommodation expenses.
  • Scandinavian countries. Denmark offers up to $810 per month despite the education is free, too. Sweden offers $700 per month without interest plus student grants. Norway delivers loans to accredited institutions and allows to convert them into grants.
  • The UK. Students apply for money through local ed authorities. Later, they will repay loans from their salaries at 9% of the annual gross. Moreover, loans are nullified if students can’t repay them in 25 years or by reaching 65.

Closing Thoughts

Overall, short-term loans are similar everywhere. Amounts, repayment periods, and interest rates may differ but the basics are the same. Governments control these markets to get income from taxes and protect people from wasting money via illegal agencies. Also, large national and international banks provide short-term loans in addition to other types. Means, it should be easy to apply for this loan regardless of the country you reside in.

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