More than one in four quick-borrowers fail to pay back their loans on time, according to a new study by the Competition and Consumer Authority.

However, the vast number of late payers are far from being a thorn in the backsides of quick loan companies. On the contrary, these businesses benefit from extending customer loans.

Loans for impulse buying
Quick loans are small loans, usually with a maturity of about a month. Previously known as SMS loans, you can obtain them quickly and easily through your smartphone or PC.

“Our study indicates that 30 percent of corporate revenue is generated from loan extensions and installment plans,” Niels Enemærke from the Competition and Consumer Authority told DR.

“Thus, it is certainly not a disaster for companies if borrowers do not pay back their loans on time.”

The risk of loan extensions
Patrons that cannot pay back the loan after a month have three options: debt collection, payment by installments or extending the loan by another month.

It’s all part of the business, says the country’s largest provider of quick loans, Vivus.dk

“Of course, we earn money when people extend the loan. We see nothing wrong with that,” vivus.dk manager Jens-Ole Klitgaard told DR.

“The customer pays a fee to extend the loan, thereby delaying payment to the following month. It is smooth and simple.”

Pricy renewal fees
However, renewal fees quickly become expensive for the borrower. Depending on the provider, a loan of 1,000 kroner extended only four to five times could result in the borrower having to pay almost double back.

“Quick-loan providers get most of their business by lending money and then receiving payment from the interest and fees. A large share of their revenue comes when people do not pay on time. It’s a part of the business that is  important to them,” explained John Norden from Mybanker.

The Competition and Consumer Authority estimates that 75,000 people are now using quick loans to acquire quick money – an estimated 430 million kroner a year.