Payday loans follow the money market accounts: For new customers is paid
If a bank offers new customers 1.5% interest on overnight money, it is also in a loss position because the bank could borrow 0.05% of the money from the central bank. The fact that, at the end of the day, a part of the acquired deposits remains in the house and that the bank does not have to deposit any collateral, unlike central bank loans, does not change that much.
Now this practice is also entering the credit business: limited loan amounts are no longer offered only at interest-free interest rates, but at no interest. With a default risk of 2% and administrative costs of 3%, the costs add up to 000 2,000 net loan amount. So much do banks invest in new areas in other areas. Comparison portals copy this strategy now.
Many small loans damage the credit rating
There is some evidence that the bill does not work out at the end : unlike call money accounts and, above all, current accounts, advertisers do not have to overcome any convenience fee in order to withdraw after claiming the special offer: Is the loan erased, remains of the noble donor apart from regular advertising not much to see.
That’s why consumers do not have to worry about that. However, the development of personal creditworthiness of those who are too open-minded and frequently make use of cross-subsidized small loans could be cause for concern. It is assumed that many relatively small amounts of credit can burden the credit bureau scores.
This is due to the peer group process, which is used by credit bureaus such as credit bureau to forecast loan default probabilities. A consumer is assigned to groups of other consumers who have a similar feature constellation. Relevant features are z. For example, the number and nature of completed loan agreements. Statistically, consumers with many small loans are more likely to be affected by payment defaults.
It should not be forgotten that fully repaid loans can also improve credit rating as a “positive feature” : the data is stored by credit bureau for three years after full repayment, For small loans, however, the risk of adverse classification appears high. Where exactly a “critical level” begins is unclear, since credit bureaus regard the composition of their scores as business secrets and in this opinion have been confirmed by the BGH.
The marketing war in the credit business raises questions
The “zero-interest policy” of comparison portals and Co. is not the only development in the lending business that is currently raising questions. Another concerns peer-to-peer credit marketplaces, many of which are involved in non-interest-bearing loans. Platforms such as the Berlin-based company centiloan once began with the claim of revolutionizing the credit market: loans were to be granted via marketplaces “from person to person”, with advantages for all those involved.
What hit a nerve in the time frame of the global financial and economic crisis and raised hopes seems to be stuck in a dead end today. In marketing, ie the most visible area of a company, the platforms are today a veritable battle with comparison portals and other actors and are barely distinguishable from these current TV commercials from centiloan, for example, no longer address the principle of social lending,
And behind the scenes? Already years ago, centiloan banks integrated into the credit marketplace according to own statement, in order “to be able to offer an altogether broader credit offer”. The Berliners are not an isolated case a significant part of lending in the social lending segment is now apparently by banks or institutional investors such as hedge funds. There are no detailed statistics, not least because a significant part of lending is formally settled through banks.
Pure brand growth at the expense of quality
At present, the lending business seems to be primarily concerned with quantity and brand growth which will inevitably lead to losses in quality. PtoP marketplaces are becoming a mixture of intermediary and credit comparison portal, intermediaries are becoming consumer portals, where the lending business is only one component of many and some portals are switching more advertising than all the major banks together.
The consequences are foreseeable: Where sales targets have to be reached quickly, only customers with a 08/15 profile will be served. Those younger than 30 or over 60, earning less than 2,000 net per month, having negative credit bureau entries, being self-employed, or having to serve maintenance obligations or loans, will be among the most vocal advertisers to be disappointed more often.