Find The Best Short Term Loans UK Residents Can Benefit From

Going by the level of discussion in the media, you could believe that payday loan firms and short term loan providers have no morals or restrictions when it comes to offering money to people. The media image of these loans is akin to money lenders offering cash to everyone who wants it and then placing a great deal of pressure on people to ensure that the money comes back quickly. This is clearly not the case when it comes to payday loan providers but of course, it is not as if the truth is the most important element for the media to focus on.

You will find that the vast majority of UK shirt term loan providers, especially the reputable ones, will ensure that their clients meet strict criteria when it comes to obtaining a loan. This makes sense for the business because it safeguards them slightly when it comes to receiving their money. It also means that they will comply with the financial regulations that are imposed on companies. Firms have to show that they are being responsible and this is why there are requirements that need to be met when applying for a short term loan.

The first thing that most firms will look for is proof of an income and that the person making the application is in employment. This is not to discriminate against people who are not currently in employment, it is a move undertaken to ensure that people are taking out a loan that they can afford to pay back. Most loan companies will only offer a loan amount in relation to the amount of income a person receives and their ability to pay it back. This means a reputable payday loan firm will offer more money to a client that takes out an instalment loan, where the payment levels every month are more affordable.

What are the most reliable short term loans UK residents can find?

Another aspect that many firms insist on is the person being resident in the United Kingdom. When it comes to finding the best short term loans UK residents can find, it makes sense that there is some proof of residency in the United Kingdom. This is partly down to legal requirements and the fact that different countries have different rules and regulations with respect to lending money to people. In the United Kingdom, there are strict requirements and firms have to make sure that they operate within these rules. Providing loans to people who are in the United Kingdom and in employment will ensure that a loan provider is operating within the legal requirements imposed on them. While some people may find that these rules are prohibitive or limiting, they are imposed to offer a greater level of comfort and assurances for everyone involved.

It may seem as though payday loans are freely available in the United Kingdom, but there are strict limits. It is likely that the loans will be limited to a minor amount and some firms will place even further limits on clients. Some firms will limit new clients to loans of £300 and other companies will place a limit on how many applications or loan requests a particular client can make in a short time scale. These are all ways for businesses to remain in control of the loans they provide and it actually helps to safeguard the applicant. If someone is refused a loan, it may not seem as though this is in their best interest but there will be times when this is definitely the case.

There is no denying that short term loans are a major discussion point in the United Kingdom these days. While not everyone has benefitted from these loans, when used properly, they can provide comfort and breathing space for many people. This is why the regulations for short term loans are in place across the United Kingdom.

Payday Loans no Brokers

The world of Payday Lending has risen exponentially and it this rate of growth that has allowed skeptics to seize the opportunity when it comes to criticizing the unclear dynamics of this industry. There are several companies of the likes of Wonga, Payday UK that have more than doubled their workforce in just a span of one year and have increased their profits in exponential terms in the same time period. Therefore, there was a need to understand if this growth was leading to a more stable financial environment. However, it has been found that they have done more harm than good. It is unfair to say that only these lenders are responsible for this as we as customers have not learnt how to be responsible for the money that we borrow.

Talking in the same context, just like conventional banking, this industry has been divided into direct lenders and brokers. Direct lenders would be the lending agencies themselves whereas the brokers are usually individuals hired by these lending institutions to scout for potential customers and increase their customer base.

Differences between Direct Lenders and brokers and why for payday loans no brokers are a more feasible option:

Although it may be a good idea to hire a broker if you are looking for different lenders to fund your requirements, however in the long run, it is not considered a feasible option. There are several reasons why this is the case:

·       Brokers represent several lending sources as opposed to direct lenders who are a sole lending source. Brokers usually take longer to close the loan as compared to a direct lender as direct lenders are a one-stop-solution for all your funding needs.

·       The main problem is licensing. Most brokers do not have the licensing privileges in all the states you are applying for a loan and this could lead to serious complications. Direct Lenders do not have that drawback.

·       The fees which is usually an area of concern is something that is decided on the basis of your ability to pay, your debt to income ratio and so on. Lenders might not be able to serve that advantage as well. Brokers, since they are independent, have usually more time to tell you where you can reduce your costs.

·       Some people are under the impression that they get their rates on the basis of separate lenders. In reality, it is all decided on the plays of the secondary market and these rates are common to all. However, if you are dealing with a broker, you will not have the benefits of knowing what the best interest rate is, as a broker is always dealing with a lender that is giving “HIM” the best rate of commission.

How Payday Loans Have Become a Better Option after the FCA Regulations

Payday loans used to have a bad reputation in the lending market, mainly because of the lenders acting on their free will. Payday loans in UK were not regulated initially, which means that lenders could charge as much fees and interest rate as they liked, and they could also use malpractices for loan collection and rollovers. All this led to a lot of borrowers complaining and reporting bad lenders.

Complaints Regarding Problems Related to Payday Loans Decreased By 45%

But when the FCA came in action, it regulated the payday lending industry with heavy and very strict rules. This not only caused numerous payday lenders to close down, it also made payday lending a better alternative for the borrowers. And this has resulted in a good news that within the last few months, there has been a 45% decrease in the number of complaints for payday loan problems.

How the FCA Regulations Improved the Payday Loan Scenario

The FCA had imposed rules on the payday industry in January 2015, thus capping the fees and interest rate charged on all the short-term high-cost credit loans. A cap of 0.8% per day for the borrowed amount was set for all the lenders. Also, in case of late repayment, the lender is not allowed to charge more than £15 as default charge, and the total cost of the loan including interest and fees has also been capped at 100% of the original sum, whereas the percentage was mostly above 300% before the regulations. These new rules led to a steady decline in the problems faced by borrowers with regard to payday loans in UK.

Other High-Cost Loans Should Be Regulated Too

This also calls for other high-cost loans, like guarantor loans and logbook, to get regulated by the FCA as they are also harmful to the borrowers who are unstable financially. These loans too were reported by the borrowers as charging excessive fees and high interest rates, plus the aggressive behaviour from the debt collectors.

A guarantor loan is a credit granted to the borrower who has to get a friend or a family member to pose as the guarantor for the loan, meaning that the guarantor will pay the loan back in case the borrow is not able to repay on time. Reports have shown that the lenders don’t do a proper check to verify whether the guarantors have actually agreed to be the guarantor. Also, verification regarding the financial details of the guarantor is not done too, which means that it is possible that the guarantor might not be able to afford to pay the loan back for the borrower.

Citizens Advice chief executive Gillian Guy, chief executive of Citizens Advice, remarked that borrowers are going into debt due to the irresponsible lending practices, and the major drop in the number of complaints is a good news for everyone. He further added that payday loans in UK are not the only blight, but logbook loans as well as guarantor loans too are creating havoc in the financial life of the borrowers. For the welfare of the borrowers, a watchful eye must be kept on the payday lenders.

Check Must Be Kept on the Payday Loan Advertisements

Many lenders have been seen promoting payday loans as a source of credit with which borrowers can go on a holiday, a shopping spree, parties, buy gifts, expensive meals, etc. Such advertisement is also a type of irresponsible lending behaviour. The Broadcast Committee of Advertising Practice (Bcap) has released a guidance on how the payday loan TV ads should be like. This guide has been made to prevent the lenders from showing payday loans as a fun-going and easy way of credit, while hiding the high-cost serious nature of it. This guide was released after Wonga, a popular payday lender, released a new ad campaign that showed ''hard-working dinner ladies and mums''.

According to the Bcap, advertisements must be responsible too, and loans should be shown as a serious commodity to be used for emergencies and not non-essential spending. The guidance states that the ads will be verified and assessed on the basis of their overall context. Also, humorous or light-hearted songs too can distract the audience from the seriousness of payday loans in UK, hence they should be carefully used.

Payday loans should be used carefully for unexpected bills. But if an ad emphasises on the speed of loan approval, then it can turn out to be a distracting content too. Ads like ‘Get Payday loans within 24 hours’ can hide the serious factors hidden behind the instant approval of these loans.

Bcap, while reviewing the payday loans TV ads, stated that to avoid doubt, ad makers must avoid exhorting children to request their parents for borrowing a payday loan to buy them expensive things.

But as for the present, broadcasters are required to judge the ads and their schedule responsibly to avoid wrong positioning of other product ads with payday loans ads, especially with the products that are targeted towards children.

So Should Borrowers Borrow Payday Loans?

Of course, payday loans in UK are one of the best possible credit sources in the finance industry. They help you out during urgent monetary needs and are easily paid off on your next payday. But they can harm you too if not utilised carefully.

The FCA has done an extremely good job by imposing strict rules on the lenders, but the borrowers need to be careful too. As a responsible borrower, it is your duty to assess your financial situation to see whether you can afford to borrow a payday loan or not. If not, you should better not take risks, as it may cause you a lot of unnecessary debt. Remember, never ever borrow a payday loan for daily uses. Keep yourself educated about the risks of taking payday loans, and keep yourself away from debt and loans as long as possible.