Lending Stream Loans

As many of us are aware the market for short term loans have changed quite dramatically in the last few years. There has been a clear shift in not only the product being offered by lenders but also the approach being taken by remaining lenders. By saying ‘remaining’ lenders I am also highlighting the fact that many of the lenders who once existed in this market are now no more. Although online short term loans have been available for 10 plus years, the road has not always been a smooth one. The original product offered by many lenders was gradually highlighted for its flaws and restrictions when it come to offering the best possible lending solution to customers. Many of us are familiar with this product, widely linked to the online borrowing market; the payday loan.

Many lenders for many years offered payday loans, such as the lender Lending Stream. A payday loan allowed the applicant to borrow an agreed amount until their next employment pay date when the agreed amount would be repaid. Payday loans varied in value but were often in the region of £300.00 and given that interest was usually charged at about £30.00 per every £100.00 which was lent, a loan of this value would have meant a repayment of £390.00 on the agreed due date. Although the payday loan product was simple and easy to understand, many lenders such as Lending Stream, found that customer struggled to make the lump sum repayments requested of them. In such instances customers turned to expensive extension fee repayments which allowed the interest of the loan to be paid to avoid a default whilst not reducing the amount originally owed.

What became clear over the years was that the payday loan product was no longer able to effectively meet the modern day requirements of the short term loan user. As a result of this some big changes were made within this market. Not only has the product offered nowadays changed but also the way in which lenders approach the process of approving these short term loans. Taking Lending Stream as an example, they now offer customers the opportunity to apply for short term loans which can be repaid over 6 monthly instalments. The idea being here that the term is fixed and therefore avoids the need for the expensive extension payments and also the monthly repayment amount is considered more manageable. Given that the term of repayment has been extended in this instance, the repayment amount each month is considerably less than the lump sum style of the payday loan. The other change which has taken place is within the application approval process as mentioned. Nowadays lenders take into account far more than just simple snapshot of the applicants credit reference file. This means other elements are used to determine if the requested loan is suitable to the individual in question. Whether this be related to affordability and budgets or employment status and related details, the point being the checks nowadays are more specific to the individual applicant.  

The Checks Completed for Short Term Loans

In recent times the application process for short term loans has become more detailed and in-depth. This means lenders are taking extra measures to ensure the loans which are being granted are fit for the intended purpose. Although short term loans have always been known for their quick access and easy application process, the years in which the market has been in operation has shown changes needed to be made. So although nowadays the process of applying from a customer’s prospective is still straight forward and relatively quick, the lenders have a new range of checks which are taking place behind the scenes, so to speak. These checks are going a long way to ensure consumers are being offered lending resources which are suitable and therefore repayments which are a realistic reflection of their requirements. Today we will be reviewing these practices in a little more detail in an effort to better understand how a short term loan is processed.

All short term loans now require a level of credit checking in the vast majority of cases. This means the applicant will be subject to a review of one or more credit files in order to progress their application. Lenders will use a variety of sources in an effort to understand two factors. The first of which is the applicants previous history of repayment. This could be anything from a current account through to previous monthly loan repayments. This previous history is important as it provides an idea into how the applicant has behaved with credit commitments in the past. The second point of this check is to understand in better detail what active credit commitments the customer already has. This could be anything from other short term loans through to car finance or traditional bank loans.

The second element which now appears in the vast majority of short term loan application processes is budget based information. This means as part of the online application form the applicant is asked to provide honest and accurate monthly budget information compared to their monthly wage. This information is often broken down into sections, such as rent and living expenses as well as a section to detail other existing credit commitments. Lenders will then use this information alongside the applicant’s credit reference file and other elements of the application to better understand if the customer truly has the ability to repay the loan for which they have applied for.

Other more manual checks which are likely to take place with these sort of short term loans include employment validation and duplication checks. For employment checks this means the lender will make active efforts to ensure at the point of considering the loan that the applicant is employed as they have stated. This of course is very important in ensuring the customer has the basic means to support the proposed loan. The other manual check, which is likely to take place before approving the loan, is a check to ensure the customer and their details is not linked to other accounts known by the lender in any way; which may be of negative consequence to the present application.

Considering Your Credit When Taking Loans

When your credit rating is considered poor or bad, it can prove difficult to be able to obtain credit again. Whether this is a credit card or a traditional loan, having a history of poor repayment can make proving your current ability to repay a financial commitment difficult. The status of ‘poor’ or ‘bad’ in terms of your credit rating is dependant in part to the company who are considering a form of credit. Although there are different ratings which can be awarded in terms of how you have performed previously with your credit based commitment, often lenders will review the file for themselves and based on their own criteria deem whether their product is suitable or not. This means the decision you receive regarding a potential lending resource could easily vary from one lender to the next. Although many of the more traditional lenders are likely to have similar criteria given the value of their loans, there are alternatives which may be able to provide a route back into credit. One such alternative is the short term loan. These loans have been available to consumers online for nearly a decade now and given the value of the loans offered by such lenders tend to never be greater than £1000.00, the criteria for approval is different to mainstream credit.

Short term loans are a resource for borrowing a small amount of money over a short period of time. The values of such loans usually range from £100.00 through to £1000.00; with the higher loan amounts usually being granted to customers who have a proven repayment history. The purpose of these loans is to assist consumers over a short period of time, and therefore are not designed to help on a continual basis like more classic borrowing. The repayment terms are flexible and normally allow customers to repay over anything from a few months through to a year. As a result of these two facts there is often a short term loan which is able to fit the bill. Where short term loans can be of extra value is concerning an individual’s credit rating.

What short term loans can do is offer the opportunity to demonstrate an ability to repay credit. For those of us who have previously shown a lack of ability in repaying financial commitments, borrowing from a short term loans lender and repaying the agreement as required may give the opportunity to out an updated ‘stamp’ on your credit rating and therefore an updated view for future lenders to potentially consider. Of course the key here is to borrow in a sensible manner and repay the instalments which are set out by the lender as required. Be mindful to consider the options set out by the lender and ensure the correct resource is utilised. As discussed here there are many flexible options to choose from so many of us will find there is loan which can match our existing budget and its requirements. For more advice regarding the most suitable repayment terms why not speak to the lender directly.