In recent year’s short term loans have come
under increasing pressure from regulators to improve both their product and
service being offered to customers. Short
term loans are also known as payday loans and
instalment loans and are usually accessible via the completion of an online
based application form. These loans have actually now been available via these
means for more than a decade and as such have established themselves as an
often used consumer borrowing tool. Over the years many millions of consumers
have turned to short term loans when they have had a requirement to borrow a
small sum of money arise. These loans are usually offered as either one-off
repayments or via the means of monthly instalments, with loan values which
range from £100.00 to £300.00 normally and in some cases, loan values are
offered up to £1000.00. Over the years the market has certainly experienced ups
and downs as far as customer satisfaction is concerned, with the resource
itself being called into question over the years. With this in mind it is not
surprising then that in recent years the market has had to answer to the
demands of a newly appointed regulating body; the Financial Conduct Authority.
The Financial Conduct Authority was
introduced as the regulator of short term loans in an effort to bring this vast
online consumer borrowing
resource into line. For many years many lenders existed within this market and
it was felt they had in many ways lost sight of how to effectively serve the
needs of short term borrowers. In the early days of the market the products on
offer were hailed as much needed and able to fill the gap in terms of the gap
between small time borrowing and larger borrowing offered by long established
borrowing facilities. The loans on offer enabled consumers to borrow on a small
scale; something which had not been readily available before and the result was
that consumers were welcoming of such an option. Over the years though it
became clear that although the need for short term borrowing was very much
present, the manner in which short term loans lenders operated was not ideal.
In order to understand this further the FCA
conducted a complete review of the market and exactly how it had come to serve
short term borrowers. The result of this research was clear; short term loans
lenders were not considering their applicants ability to repay the loans being
granted in an effective manner. In more simple terms this meant that lenders
were not fully considering affordability. The application of affordability;
meaning to fully understand an applicants true ability to afford a form of
borrowing, is just as important in short term borrowing
as it is for any other form of borrowing. In order to ensure going forward
short term loans lenders recognised this fact the FCA made a number of key
changes. These changes were applied to lenders via new rules and regulations
and therefore better guidance to lenders who truly wished to support the needs
of short term borrowers.
Quick payday loans are a means of borrowing
a small sum of money. Thanks to a vast selection of lenders, the options
available actually come in a range of different shapes and sizes. This means
whether you are looking to borrow only £100.00 or perhaps as much as £500.00,
there will be a number of different lenders to choose from. In addition to the
range of different loan values which are on offer within this online market,
there are also a good selection of repayment options as well. It would probably
be fair to say that when we think about quick
payday loans, we typically think of a loan which
needs repaying in full on our next pay date. In reality though quick payday
loans can be repaid in a whole host of different ‘shapes and sizes’. This helps
to make sure the product is potentially suitable for a whole range of varying
consumer needs. This means lenders have kept in mind what is suitable for one;
is not always suitable for all and as such choice is really important. When we
think about choice exists within all areas of our economy, helping to ensure we
can make sensible and informed choices about our finances and even purchases.
Today then let’s look at quick payday loans and how they can be repaid.
So one of the most classic ways of borrowing
money from quick payday loans is one which comes with a simple repayment. This
is the payday loan in its purest sense because the customer agrees the loan is
only needed until their next pay date and on this date they can afford to repay
all of the loan
in one hit. Given that these loans vary in value from £100.00 to £500.00, as discussed
above, it does mean that this type of borrowing
can come with quite a large repayment amount. This means it is important to
ensure the amount due it affordable and realistic, so be sure to check before
signing the loan agreement. For those of us looking for more flexible repayment
options, the instalment based quick payday loans are the way forward. Instead
of repaying the loan as a one-off repayment, instalment borrowing allows the
monthly repayment amount to be tailored better to our existing costs and
therefore financial needs. Many lenders of the instalment based loans offer
several different repayment terms, meaning we could choose to repay over 2, 3
or 4 months for example or perhaps 4, 5 or 6 months as another example. This
means we can compare the costs monthly and also the total cost of borrowing as
well and then make a decision which suits us best. For those of us who know it
would be much more affordable to repay a loan via instalments, one of these
type of loans will almost certainly be a much better choice. So the key is to
investigate the options available and then make a decision based on what works
for you.
There
can always be times when someone needs money and most likely this can be down
to a high number of different things. There can be some people who may require
a large amount of money as they are looking to make some form of expensive
purchase. This could possibly be for a new car perhaps or maybe someone is
looking to obtain money for some form of home improvements. There can then in
contrast be others who may only need a small amount of money as they are
looking to have some help just paying a bill or they need some additional funds
to just tide their current funds over until they are next paid by their
employer. Now regardless of whatever they need money for, if they have this
saved away they can then look to use this as required to pay for whatever they
need. Some people may then even have enough money saved away to pay for their
requirement outright or at least they can put money towards what they need. If
it is not possible to use this option then the chances are someone will then
need to borrow the money. Quick cash loans for example can be one common
borrowing option.
I
think it will be fair to say that when most people are looking to borrow money,
the chances are they will firstly look to borrow the cash loans from their friends or
family. This will becoming much more common if only a small amount of money is
needed. They know that obtaining money this way can be done so interest free
which is always important. People here then will only pay back what they borrow
in the first place. If on the other hand financial lenders are used such as payday lenders, interest will be charged
on any amount that is then obtained. Some lenders offer better rates to
customers including rates on the interest so always bear this in mind. Some
finance types such as payday or other quick cash loans can work out to be an
expensive way of borrowing money.
Just like turning to money saved, turning to
friends or family can be useful and beneficial for people but unfortunately for
everyone it is just not an available option when borrowing. Payday lenders
could then help provide people with loans if they are needed. This lender aims
to help people with bad credit get loans when they are required. People here
can borrow quick cash loans for amounts usually up to £500.00. These can help
people prepare for the unexpected and can also help people last out with their
money until they are next paid from their employer. Never should any short term
loan ever be used as a long term borrowing option. As the name would suggest
quick cash loans aims to give people the money quickly. This is probably the
best benefit that they offer as well as discussed before they can help people
with bad credit get finance when their other borrowing options are then
limited.
In recent years the manner in which payday loans are
offered to consumers has changed. We all usually think of payday loans as a
very particular type of borrowing and as such assume there is only one manner
in which repayments can be made. This assumed repayment term is one which asks
that repayment be made as a one-off sum on the date on which the customers next
employment pay date falls. Those of us who have this assumption would be right
in many respects as in fact for many years, this is the manner in which payday
loans were needed to be repaid. In the modern day market place payday loans
have changed quite considerably though and nowadays consumers are offered more
varied repayment options, should they be needed. The change in product offering
is just one of the many major changes which have unfolded in the payday loans
market in recent years, another of which being a change to the regulating body
responsible for the entire operations of the market and the lenders who operate
within it. As of 2014 the FCA; full name Financial Conduct Authority, have been
in charge of the payday loans market and the entire operations it contains. The
FCA were given the task of ensuring this multi-million-pound consumer market
was still serving the needs of consumers effectively and in doing so discovered
a lot of change was needed.
Through what turned out to be a yearlong
investigation, the FCA discovered that the original product offering of these
lenders had become somewhat dated. The payday loan was in principle a useful
consumer borrowing choice but the manner in which repayment was requested had
long become dated. Given that payday loans ranged in value between £100.00 and
£500.00, the repayments due when interest was accounted for often became
costly. Although the repayment due was always very clear, this did not always
mean it was affordable and due to lack of any other suitable alternative many consumers
continued to borrow in this manner despite their potential inability to afford
the repayment amount due. In order to resolve this long running problem, the
FCA introduced new rules and guidelines concerning responsible lending
practices which meant lenders within the market needed to reconsider how it was
they delivered their product and more importantly, its repayment options.
This is why nowadays payday loans are offered
via the means of instalment based repayment options. Instead of asking that
customer make a single repayment to repay the loan amount borrowed, instalment
based repayments are common place. This means should it be more sensible and
affordable to do so, consumers can agreed a monthly repayment term, at the
point of borrowing, which will allow repayments to be to spread over smaller
and more manageable monthly terms. The change in regulator, product
and general rules which govern the market and how loans are granted mean that
the payday loans are now considered a much better equipped borrowing resource
and therefore able to meet the realistic needs of consumers.
When it comes to online payday loans
one of the most important factors is that of affordability. Affordability in
the context of these online loans relates to each applicant’s true ability to
afford the loan and how lenders reach the conclusion as to whether they do or
not. Surprisingly affordability has not always been at the centre of the
approval process of online payday loans and in fact this has only become the
case in the last few years. The tipping point was the introduction of the FCA
as the regulator for the entire operations of the market. In early 2014 the
Financial Conduct Authority (FCA) were appointed as the organisation
responsible for the entire operations of all those lenders who offer online
payday loans. This meant that the FCA had the required power to make changes
where they were needed. In order to establish areas for improvement the FCA
conducted a mass scale investigation into the lenders of the time and the
common denominator; a lack of affordability assessment.
Not only did the FCA uncover the fact that
lenders were not correctly identifying where loans were affordable or not; furthermore,
the loans being offered were also lacking in flexible repayments which went
against affordability. This issue stemmed from the fact that the product
originally on offer was very limited. The product
in question was known commonly as the ‘payday’ loan and as the name suggested
offered a product which was focused specifically on repayments being made on
the customers next pay date. Where this specific repayment structure was always
made clear to borrowers, the cold hard facts of the manner were that in too
many instances the loan proposed and later granted, was simply not affordable.
The payday loan meant agreeing to a one-off repayment comprising of the entire
loan amount plus the interest charged by the lender. Given that the loans
themselves ranged in value from £100.00 to £500.00; it is easy to understand
how the repayments due under such agreements quickly became expensive and it
did not take long for the FCA to high light this fundamental flaw.
So not only were online payday loans
limited in their product offering but through research the FCA conducted that
this then lead to many instances where the loans being granted were simply not
affordable as a result. In order to resolve this the FCA introduced an entirely
new set of rules and regulations for the online payday loans lenders to operate
by. This meant not only making their products more flexible, therefore making
them more affordable and consumer friendly but in addition lenders were
required to adopt a completely new approach to lending. This approach is one
which centres around affordability and making sure the loan requested is truly
and evidently affordable. In order to understand such manners adequately the
modern day online payday loans lenders are concerned with greater levels of
detail as far as their applicants are concerned and in addition have replaced
payday borrowing
with instalment based borrowing where suitable to do so.
