Understanding short term loans

There can be a number of different borrowing things to consider before any financial application can then be made someone. That is just one of the many reasons why people should always explore the different avenues of borrowing rather than them just rush into applying for the first piece of finance that comes along their way. People should know that they definitely need the finance in question and that they definitely need to borrow any amount and then if so any amount taken must be a realistic figure. Any loan borrowed must then be affordable for that person to manage so the debt can be repaid back to the required lender. The type of finance can then be considered and here there are often multiple borrowing options, people can often take out both short term loans and instalment loans where different amounts are borrowed and then repaid over a number of different repayment terms. Credit cards are another very common way for different people to borrow money. In the article below I am going to focus solely on short term loans as a way of borrowing and will help people looking to understand what these offer to people.

Short term loans are loans when people tend to borrow small amount of cash for repayments then due back to lenders within a twelve month maximum period of time. People borrow short term loans when they need low loan values and then they aim to repay the debt anything from one single month to the maximum duration of twelve months. People tend to borrow these loans for amounts somewhere between £100.00 and £500.00 or sometimes people can borrow up to £1,000.00. They are used as a short term financial solution and should therefore never be used as a way to borrow any sum of cash for a long term period of time. People should know that taking loans like these can often be an expensive way to borrow the small loans for a very limited period of time. Some short term loans are more expensive than others so always consider that fact.

A major benefit of the product would be the speed in which people can get the money in their chosen bank account whenever there short term loan application is accepted. People apply for the loan usually online or occasionally over the phone in an application process that should only take a matter of minutes to complete. If that same application is then accepted by any lender than the potential borrower can then look to receive the funds in their chosen bank account the very same day of their application being made. There can be some lenders who look to fund their successful applicant within just minutes of their loan being approved. Short term loans can therefore be very useful for people who all of a sudden have an unexpected bill arrive as they can get accepted for their loan quickly, then look to make that requirement payment as soon as possible.

Understanding Short Term Loans

In order to ensure the correct lending resource is obtained it is important to consider all the options presented in the short term loans market. This online borrowing facility has been available long enough now that most consumers are aware of the resource which is offered but may not be aware of the full range of loans which now can be obtained. Although as a whole the market has been operating to offer small loans for over a decade, recent years in the market has seen short term loans be transformed into a much more flexible lending resource. For many years this type of borrowing meant a very specific type of loan which over the years became in many respects an outdated lending resource. As the majority of consumers will know this type of short term loan was known as a payday loan and it offered a very simple and somewhat restricted way of borrowing. As mentioned, recent years have seen the short term borrowing market expand to offer a better selection of loans to consumers, in an effort to continue to meet the realistic needs of the modern day applicant.

Nowadays short term loans are focusing their efforts on offering a product which is a combination of affordable, flexible and therefore realistic. As the years in which short term loans have been in service have passed, it became increasingly clear that the true needs of consumers who use this type of borrowing have changed. Whereas in the early days consumers were able and prepared a specific type of repayment term; offered by the payday loan, nowadays the way in which the modern day consumer manages their finances has changed and as a result so have short term loans. The payday loan which was first into the market aimed on allowing a simple and effective borrowing resource in a finance market which do not account for consumers who only needed a short loan, for a short period of time. The payday loan was delivered in a single repayment term package which meant a consumer could borrow until their next employment pay date, at which time they would repay the entire balance. This meant making repayments in the region of £300.00 to £400.00 as a lump sum.

Nowadays short term loans are able to be more flexible thanks to a massive shift towards instalment based loans. Instead of offering the payday model, most lenders instead offer consumers the ability to borrow and repay the loan over a number of agreed monthly repayments. Typically consumers nowadays are used to making instalments towards the goods and services they require and therefore making instalment based repayments for short term loans seems far more fitting. The change in product offering means consumers now have better control over the amount which is repaid on a monthly basis, depending on the period of repayment which is selected. This also means consumers can elect to repay over a longer period, if needed and understand the about of interest which is repaid is reflective of this time period.

3 Month Payday Loan

About 20 years ago, there was a new financial product that was being retailed in the name of payday loans which was a simple concept in practice. It allowed a certain sum of money to be paid to a borrower in exchange of a post-dated check in collateral. This check guaranteed the repayment of the loan amount. Now this service is being used by millions of people across the globe, where they are paying an average of 525 pounds for an average credit amount of 375 pounds. The difference in the amount is the exorbitant fees that are charged by almost all payday lenders. Payday Loans come in many forms including 3 month payday loans, 6 month payday loans and other types of equal installment loans.

The reason why 3 month payday loans and other options were made available is because the two week time period associated with these loans was what was causing financial distress amongst the borrowers. It was observed that the repayment of the loan with the interest fee consumed almost one third of a borrower’s income, leaving him with no choice but to renew his loan or borrow once again.

There are some facts that have been collected over a certain period of time and which give us a fair idea of the on-ground reality.

·         It has been estimated that over 12 million people use payday loans in all its forms, annually.

·         Although payday loans are considered to be short term solutions for unprecedented expenses, this is not the reality. Borrower’s spend at least 525 pounds on an average by way of interest and are in a state of debt for at least 5 months in the year. Almost 70% of the borrowers use these loans for paying off their bills whereas only about 15% use these loans for unprecedented expenses.

·         Almost 50% of the times that payday borrowers take out a loan, they are in some sort of financial trouble and have a problem meeting their monthly expenses.

·         Payday loans are in general unaffordable. There have been several studies which have proven that a majority of the payday borrowers are able to afford only 40 pounds on an average with the time period of two weeks and only about 16% are able to afford the average lump sum amount of 400 pounds.

·         More than 40% of the payday borrowers require some kind of financial assistance in the form of a tax refund or help from friends and family to pay off the payday loan.

·         If payday loans didn’t exist, a majority of the borrowers have said that they would cut back on their monthly expenses, would not delay paying their bills and look at less risky forms of credit such as selling or pawning possessions. This number represents a staggering 80% of the borrowers.

·         In states that have restricted laws pertaining to the freedom of payday lenders, there is an evident net decrease in payday loans. Rates of online borrowing also go hand in hand with the laws pertaining to payday lenders store fronts.

·         There is a conflict of interest when it comes to borrowers regarding payday loans, as a majority of the borrowers say that payday lenders have taken advantage of their financial situation and there are also a majority of them that say that they have provided relief. This has been shown in 2 independent studies.

·         The verdict though is unanimous. More than a majority of the borrowers feel that the regulation of payday loans is needed.

Just from this analysis, the results that can be clearly seen are as follows:

·         Surveys and market research depict that any amount exceeding 5 per cent of the borrowings is something that borrowers cannot afford. Higher payments than 5 per cent should be prohibited unless lenders prove that the borrowers are capable of borrowing a higher amount.

·         Ensuring that borrowers are able to repay the loan amount in installments, which is where 3 month payday loans can be most beneficial, and in addition to that, also ensure that the loans are structured according to the ability of the borrower to repay the loans and also ensure that they are protected against driven refinancing, excessively long loan durations and abusive collection practices.

·         There have been several acts that have been passed including an act in 2010 that allowed payday borrowers to pay off their loan amounts in equal installments over a period of time and at the same time also have the option of repaying the loan before the stipulated time, without any penalty charges.

·         A majority of the borrowers have stated that instead of the complete elimination of the industry, if there could be stricter laws that allow the payday borrowers a significantly less chunk of their income and also have the option of paying off the installments over a period of time in equal installments.

All these recent revelations have proven that there needs to be a more responsible stand taken by the regulatory body responsible for the regulation of this industry and at the same time, there needs to be more accurate information being given to the borrowers. This means that the lenders also need to adopt friendlier measures to ensure that borrowers are not cheated and they should welcome the regulations as imposed by the regulatory body. However, this is not the case. These new regulations as imposed by the Financial Conduct Authority and the restrictions imposed by the states have seen the exit of a majority of payday lenders. There are only a handful of payday lenders who have agreed to abide by the standards as set by the financial ombudsman. This also implies the increasing dependence on the alternative lines of credit, which could prove to be less risky and work towards building a more secure future for the borrower.

Whether these regulations lead to a complete elimination of this industry is something that is yet to be seen as the few payday lenders have introduced new lines of credit to their portfolio which includes other types of installment loans and so on.

Payday Loans No Credit Check

It is not entirely uncommon, for most of us to be faced with emergency situations in which we are not able to meet our current needs financially. These are some of the most stressful times that one can go through. Even when a person has a stable job with a regular monthly income, one might still end up in need of extra cash due to occurrence of unpredictable events. It happens to the best of us, it would be a pipe leaking in the basement, the fridge crashing, or your car breaking down, no one sees these kind of expenditures coming. This is where Payday Loan direct lenders step in so that you are able to have access to the money you require, but do not have.

Payday Loans no credit check are short term loans, and are also known as check loans or cash advances, these loans are usually for 500 pounds or less. They carry fees of about 10 pounds to 20 pounds per 100 pounds that is borrowed, according to the Consumer Financial Protection Bureau.  One must first know that amount that he requires, and whether you are able to repay the loan before applying for it. It is not recommended by financial experts for people who are struggling with long term debt.

Applying to a bank for a regular loan, usually has a long procedure. You are required to meet a number of requirements and have in place all your paper work. Once you have gone through with these often tedious procedures will ones loan be approved sanctioned. One may also have bad credit due to missing out on your payments on your current account, mortgage or loan. Bad credit rating makes it hard for a person to keep a bank account, let alone apply for a loan.

When in need of Payday loans no credit check, the person concerned writes a cheque, in this cheque he includes the amount that he is borrowing as well as the fee that is charged against the borrowed amount. The loan is then processed to the person minus the fee. The cheque that is given by the borrower to the lender is not cashed in, the lender holds on to the cheque. Then on the person has the duration of the maturity of his loan to gather his funds. If he is able to do so, he may directly make a payment to the lender. In case this fails to happen, and the person is not in a position to pay back the loan on the date given to him, the lender can go ahead and cash in on the cheque that was given to him earlier by the borrower. In this case when the period of the loan is extended or there is a ‘roll over’ the fee that was previously charged against the borrowed amount is subject to change.
It is required for the company to maintain complete transparency with its customers, for example the cost that the person would incur for the loan he has applied for. This, and the payday lenders must give you the finance charge which is the pound amount, as well as the APR which is the Annual Percentage Rate (the cost of credit on a yearly basis); must be provide in writing before you sign for the loan. This is the requirement placed by the federal Truth in Lending Act, which treats pay day loans just like any other form of credit.

The borrower has to fulfil a simple list of requirements in order to qualify for a loan. The person has to be a citizen of the UK, he or she must be above 18 years of age, in a position to provide valid personal id proof; persons concerned are also required to be employed with a regular source of income, and a fully functional bank account. Persons who are self-employed are not eligible for such loans.

Payday loans are in a position to attract and cover a larger section of society. This is because it does not employ the regular process of elimination. Payday loans do not reject outright, people who have credit histories that are not exactly positive in nature. This is unlike the functioning or regular loaning companies. Here anyone with a good credit history or a bad one can apply for a loan, as there are no credit checks.

This relatively flexible methods of functioning, of payday loans make it popular among various sections of society. You can receive the cash in hand much quicker. There are also fewer questions that are asked. In comparison to regular loans, these payday loans do not require you to do extensive amounts of paper work. This does away with the embarrassment that one is likely to face while trying to borrow money from any other source. All the needed documentation can be filled up online, it is very rare that one would be required to send in details via email, fax or in person; and this is done only when there is a noticeable difficulty in the verification of the details the borrower has provided. Further you are not required to provide any additional reference.

Credit checks are done on the persons’ history of repayments. An individuals’ credit score is a much disputed fact, and plays a big role in deciding whether you will be able to apply for a loan, or if the lender will accept or reject you. It comes in to effect when applying for a mortgage on your house, personal loans and credit card and the likes that are offered by regular banks. Credit score also plays a big role in deciding, the interest rate amount and the type of credit a person can account for. Payday loans on the other hand, do not conduct an extensive background check on every individual that applies for a loan. Once you have meet the basic criteria that has been mentioned above, one is good to go. This is what makes payday loans appealing. 

Sunny Loans

Sunny Loans having formed recently in 2013, has earned itself a reputable name across the subprime sector. The creator being Fortress Group UK, back in 2004 was previously known under the identity of one month loans, which was later acquired by Think Finance Inc. Competing locally alongside a second company that serves 12 month loans, this new service has come to be of central focus to them. Expanding over the past couple years relatively quick through TV advertisements, and online advertising through Facebook and Google.

A person is eligible to apply for a short term loan at Sunny Loans, if the person concerned is above 18 years of age, is a resident of the United Kingdoms, with a functional UK bank account and debit card. This further requires you to be employed with a regular income of at least 500 pounds per month. Taking in to account a number of factors, each person apply is assessed on an individual basis. Individual income details and information on expenditure, and any other financial obligations that one might have, are also taken in to account. This is done in order to ensure that the borrower is able to afford the loan that is being taken.

One must apply for the loan online, while following a simple and efficient process. The requirement of the online application is employer details, bank account details which include the account number and sort code, along with three years of details on your housing for example your housing address. A section of this information section has been prefilled which one can go ahead and confirm, while filling in the application in order to make the process easier and faster. It does not matter how many times a person applies for this loan, the individual is assessed every time before the loan can be approved, including the conducting of credibility and affordability checks.

All applications to Sunny Loans is subject to checks on credit, as a commitment made towards responsible lending. This is not only to keep in check that the person borrowing the sum of money is in a position to repay the loan at a given point, but also helps keep fraud and malfunctioning in check. Once a person applies Sunny Loan guarantees to leave footprints on your credit file. The website provides you with a section called Your Data, through which one can learn more about how Sunny Loans is using the information that they provide, and credit checks by Credit Reference Agencies (CRAs), after having visited the same.
In the unlikely event, that Sunny Loans has not been able to verify certain details provided, will a person be asked to send in further details so as to be able to examine them manually. This is done in order to ensure that an application is not rejected at first go, without careful consideration. It is required to keep up to date with details provided in the MyAccount section of the Sunny Loans website, and regularly check Email Ids and mobile phones. This is rare as in most cases the online application is all that is needed in order to apply for a short term loan.
This transfer of cash is free of any charge fee. The website maintains total transparency on in transaction details, which can be accessed by visiting the website and clicking on the ‘Our Pricing’ section. The application of a charge is only done against the interest on the outstanding balance of your loan. This ensures that the person is completely aware of all required details, so as to avoid any chance of unwanted surprises.

One can apply for between 1oo pounds and 2,500 pounds. Sunny Loans is however, not able to transfer monetary funds to prepaid savings accounts or debit cards such as ‘pay as you do’ or ‘top up’.
Once the application has successfully been filled and accepted the money takes about 15 minutes to reach your account. This depends entirely on the policies and functioning, of the respective banks of the person applying. You can have access to the money straight away if your bank accepts faster payments, this depends on how long you bank take to process deposits. Most banks that operate Faster Payments will be able to credit your account within an hour. Such details can be best provided to you by your bank.

One can simply employ the use of the payment calculator, to get an idea of how much you would repay if the payment is made earlier than the given date. Their flexible overpayment plans make repaying early easier. Actual repayments are shown under your agreement once you have applied. This repayment dates will always be set to your pay dates in accordance with the information provided by the person while applying.

While sighing up at Sunny Loans, you are guaranteed a great choice of loans, which does not involve any form of fee charges, control of options such as easy methods of repayment which in turn helps you in saving up on money; and you are also given the freedom of a five day period during which you are free to change your mind, free of charge. Customers at large have chosen Sunny Loans in time of the need of emergency cash, because it has been known amongst them as a trusted brand, Sunny Loans makes sure that you receive fast and effective feedback in case one is faced with any sort of doubt; there are high rates of conversions, along with highly competitive pay outs, this is also inclusive of various opportunities through which one can earn.

These are practices that are needed to be adhered to, especially in an industry such as the payday lending industry, where unpredictability is the norm. In an industry like this, it is heartening to know that there are lenders like Sunny Loans who have made an effort to abide by ethical standards and follow the moral standards set by the regulatory body, the Financial Conduct Authority. 

Payday Loans Direct Lender

There have been several discussions regarding the origin of payday loans, the exponential growth that these payday loans have experienced and at the same time, it is important to consider how payday lending has become a problem. There have been numerous studies which have suggested right from the start, the need to impose strict regulations on this industry and the belief of several critics has been justified by the problems that borrowers have increasingly been facing from the practices adopted by this industry. When we talk about the problems of payday lending and the origins of the conflict, it is important to consider how both borrowers and lenders have played an equal role in the problem of payday lending. The role of the payday loan direct lender is to maintain a strict level of transparency in their transactions and play the combined role of an advisor and a lender.

How payday lending has become a problem:

In the early 1990’s, at the behest of industry experts and advocates, a special type of short term loan option was framed which was given the belief that it would positively affect the borrower’s ability to manage their cash flow. Lawmakers carved out a special scheme independent of the other restrictions that applied to other types of credit, in a sense they were given a free market to function. This was a way of opening up the economy, according to various economists. The problems mainly existed during the 20^th century when there was a desperate need to find solutions to this existing problem of payday lending. The solution to the chronic problem of indebtedness was the equal installment loan option which was to be paid over a period of time, with each installment reducing the principal amount.

On the contrary, payday loans thrived on the interest they would receive from these loans as it was to be repaid at the end of the week and the borrowers invariably ended up renewing the loan amount. In financial terms, short maturities are preferred by the payday loan direct lender since these will be harder to repay, and renewal and the re-financing charges will take up most of the principal amount.

This can be justified with one of the most interesting examples to come at this particular point. There were a group of unlicensed lenders who took up the responsibility to form a group and allow loans at higher interest rates than 6 to 8 per cent that state laws restrictions limit extended upto, and this modified legislation was passed in 34 states within the US to end unlicensed lending and introduce the formation of installment loans.

The effort of this particular legislation was to make small credit affordable to the average citizen in response to the pervasiveness of unlicensed lenders who were dealing with unaffordable loans which was the case with as many one in 5 workers. There were foundations that decided on much more affordable rates of interest such as 42 per cent or 3.5 per cent every month for an amount of 300 pounds or less. There were several states that permitted lower interest rates and still saw a successful market for credit.

The change in Payday Lending:

In 2010, several industry experts along with regulatory bodies confirmed that that the payday lending industry has led to unintended and harmful consequences. There was a drastic change in the payday loan laws requiring the remainder of the players in the industry to shift to practices that allowed the payday loans direct lender to allow the borrowers to pay off the loan amount in equal installments over a period of at least 6 months and completely do away with the payday form of lending. This result was achieved through simple steps that were followed through an in-depth research on the effects of this industry on borrowers:

·         Analyzing the situation before and after the change in laws. The borrower repaying pattern was observed and published before everyone to see to show the positive effects of the change in laws.

·         Surveys were done with borrowers who were regular payday loan borrowers and asking them how the change in payday loans had had an effect on the borrower’s income.

·         It was also important to understand the other side’s perspective including state senators, district representatives, payday loan direct lender to gauge the response of this class of people towards the new changes in law and how it is affecting the borrower.

There was one great observation that was made by a certain state official which summed up the problem of payday loans in three-four lines.

“The interest of the business and the interest of the individual are moving in opposite directions (under the old payday loan law). We wanted one that bent those curves back a little bit by saying the businesses do better when the person actually has a route out of debt as opposed to a route deeper in debt”

Although the new loans do promise a long lasting change in the positive direction, there are a certain number of complications that come with these changes. One is the Annual Percentage Rate which has been decided at an amount of 200 per cent which could result in almost 290 pounds as finance charges if you take out a loan amount of 500 pounds if they kept the loan going for a period of 6 months. Someone who makes biweekly payments can restrict that amount to equal installments of 61 pounds each for the same loan amount.

What is needed to understand from this scenario is whether these laws will make a significant impact on the borrower’s ability to repay and whether it will truly serve as a route out of debt. At the same time, there needs to be a simultaneous degree of awareness in other forms of credit, such as credit unions, pawn shops, and other installment loans which could create a lighter impact on one’s pocket. This can only happen when the borrower is informed and make a choice which results in his overall well-being. 

Bad Credit Payday Loans

The financial economy has been known to be uncertain and the introduction of payday loans has made this the economy more uncertain which was clearly not the intent of the people behind their inception.  There were questions that were raised on bad credit payday loans as they were opening up to a considerable size of the population with questionable credit history. This situation did not face large scale regulation up until recently, when it came to the attention of various regulatory bodies, the apex being the Financial Conduct Authority. This was a concern that needed to be addressed immediately as the world of payday lending was beginning to become one of the most widely criticized means of loan generation. 

The reason for their inception was to bridge the gap between the borrower and the institution and create an alternative source of credit for mid segment families with a stable source of income, who could use some extra money to cover unprecedented expenses. The simplest example would include ones like car repair expenses or expenses which have not been anticipated.  Over the years, these loans have targeted families which are more vulnerable than the rest and that can be blamed on their misleading advertising. The middlemen or the brokers employed by these lending agencies have also targeted people who don’t have the potential to pay cash in the 2 week long period. This is completely in violation of the rules and regulations which define the nature of lending in this industry.

However, the situation is now changing. The individuals with bad credit payday loans are adding to the financial turbulence that has been expanding over the last few years.  This sector has faced a sudden surge of regulations which has dismantled their place completely. The Financial Conduct Authority is the highest regulatory body that has carefully drafted the reasons for the regulations which were creating a large number of people entering the dreaded cycle of debt. Some of the main reasons included the exorbitantly high interest rates, the penalty fees, and the repayment collection methods which have known to be torturous for the eventual borrower.

There are certain examples of borrowers with bad credit payday loans bearing the brunt of their intolerable ways. Let us discuss some of these examples:

1)      There was an incident of a borrower posting on various online websites offering payday loans, looking to find the best possible option for these types of loans. Her personal account information was accessed by a certain payday company and her account was regularly debited till the time her account was wiped clean.

2)      There were certain global processing systems that called a certain individual at work and left messages stating that she owed a company some amount of money and that because of that, there were litigation cases registered against her. This was done in the name of a company that did not exist.

3)      Another case involved an individual taking out a loan of a certain amount, after which she was repaid the amount on consolidating her debt in a debt relief organization and closed her account well in time. That person continues to receive phone calls and threats of legal action against her.

The reason why these cases need to be highlighted is because these are some of the most common examples of the fraudulent practices adopted by these payday lenders. However, it is important to know when one can file a complaint against a particular payday lender and it is equally important to understand how and when a complaint can be filed, so that this information cannot work against us in the future.

·         If the lender did not make it clear how much the loan will cost you. He is supposed to take you through all the charges and interests applicable right from a 100 pound amount.

·         If you weren’t complete and accurate information on how to pay back your loan. It is advisable to document your conversations so that it is easier to prove in a consumer court.

·         If the lender did not do a complete check into your background, verifying your ability to pay as well as taking into your consideration all the factors responsible for you taking this loan. It is his responsibility as a lender to gauge the circumstances under which you are applying for a loan.

·         If the lender did not tell you that these types of loans are not supposed to be used on a long term purpose, especially if you are in some sort of financial difficulty.

·         If the lender did not communicate how Continuous Payment Authority works. CPA is where you give them the written permission to deduct amounts from your credit/debit card. This needs to be mutually agreed upon.

·         If the lender did not tell you that they are going to be deducting the amount in regular intervals or in one go, depending upon what type of loan you have opted for. This is usually done through CPA.

·         If the lender did not talk about the implications of late repayment through their online advertising or done personally through an email or a text message. This is a mandatory requirement and needs to be followed to the tee.

It is also essential to understand this from a lender’s point of view. All the complaints that you can file are guidelines meant for these agencies to work in a professional manner. If this is not done, then it leads to trouble for the lending company as well as the borrower.

Overall View:

There needs to be a certain amount of education that needs to come with these types of loans and it is important a borrower knows his rights fully, before stepping into something as dangerous as this. These loans need to be regulated and the regulation needs to be mandated, so that there is no unfavourable practice that leads the borrower in trouble. This is the situation that has been affecting the consumer in many ways and as a result of that, the need for regulations was felt.