For those of us who are not aware of what a payday loan, it can be defined as a short term borrowing resource. This means that payday loans are very different to larger scale borrowing, such as credit cards and mortgages. Payday loans are typically £300.00 in value and can start from as little as £50.00 which it makes it very clear to understand the difference in the resource being presented compared to larger lending choices. As well as offering a specific value of lending, payday loans also have much shorter repayment terms than that of larger lenders too. Sometimes payday loans can be repaid in as little as a one-month term. This means some customers prefer to repay the loan in full on their next employment pay date. Most however take advantage of the instalment style of borrowing on offer. This means instead of repaying the loan as a one-off repayment, a number of monthly repayments are agreed instead. Typically for those who repay in this manner terms are available from as little as 2 months and as many as 6 for example.
Given the specifics of the borrowing resource available from payday loans lenders it is no surprise that realistically, they are only able to serve specific borrowing needs. Their small and short term nature means they will not be suitable for all borrowing needs and in certain circumstances would be absolutely not suitable. Take for example a large scale home improvement, requiring a total cost of £5000.00; this is the type of cost which is not meant to be supported by a payday loan. This may seem like an obvious fact to point out but it is important that any form of borrowing is entered into sensibly and for reasons suitable to the resource available.
With this in mind there are a number of different financial costs which could be supported by a payday loan provider. This could be, for example, a car in need of repair, a broker freezer or fridge, a replacement washing machine or a vet bill. What you will notice is all of these costs are the type which tend to arise un-expectantly and therefore are difficult to plan for in advance. These unplanned costs and bills can be the type of expenses that a payday loan and its small borrowing resources is able to help with. The important thing to remember is the reason for borrowing and as such, only borrow this amount. Payday loans as we have mentioned are designed to be repaid over a pre-agreed, short, period of repayment. This means ideally they should be repaid as quickly as possible. In instances where more than the specific amount needed is borrowed from a payday loans lender, this will undoubtedly extend the term of repayment and also the total cost of borrowing. Therefore when considering these loans we should do so in a sensible and responsible manner, taking into account our realistic and true financial circumstances.
Instalment loans are the new form of short term loans it has been said. Unlike the payday loan, instalment loans give consumers a better selection of choice when it comes to their repayment needs. Instalment loans take the fundamentals of the payday loan and then extend the overall service available to customers of the product, by allowing repayments to be made over a number of pre-agreed monthly instalments. It is for this reason that consumers are steadily returning to the online market for borrowing a small sum. Instalment loans have, in some ways, bridged the gap that for a long time had been forming in the short term loans market place as a whole. For many years it was solely the payday loan which dominated this market and that meant consumers who were looking to borrow only a small sum of money were somewhat limited in the repayment options at their disposal. This fact was not only noticed by the consumers themselves but also the governing body responsible for the actions of short term loans lenders.
For several years now instalment loans and payday loans alike have been under the management of the Financial Conduct Authority (FCA). The FCA was brought into power in an effort to ensure consumers were being treated fairly and with consideration when it came to their short term borrowing needs. After many years of trading it had become increasingly obvious that the payday loan in its simplest form, was no longer able to meet the majority of its customers’ needs. Instead when borrowing in the manner of that of a payday loan, consumers were given only the option to repay their loan as a lump sum repayment on their next employment pay date. This meant that many consumers were agreeing to a financial commitment which was, in reality, simply not realistic or affordable.
The introduction of instalment loans was a direct result of the FCA’s empowerment and subsequent research into how the market operated. When it became clear that consumers of such loans were not being offered flexible and varied repayment terms, the FCA brought into place new rules and requirements to amend this. As such all existing lenders later had to apply to the FCA to have their product and service approved, if they wished to continue trading. Those lenders who did not meet the requirements of the FCA were no longer able to exist within the online market place for short term borrowing. The end result is the market which exists today and therefore has lenders who are FCA approved. In order to ensure that customers are treated fairly and have sensible borrowing options at their disposal, instalment loans are widely offered. Instead of limiting customers to a single repayment term, instalment loans give the ability to make monthly instalments at a lower amount but over an extended period of repayment. Many consumers are more comfortable with this type of borrowing because the monthly instalments are better able to exist alongside their everyday and ‘normal’ living costs.
Short term loans offer consumers online access to small time borrowing resources, these resources are designed specifically to serve smaller borrowing requirements to that of larger providers such as bank loans and credit cards. Short term loans have now been in existence for over a decade and as such the manner in which borrowing options are offered to consumers has changed quite a lot during this time. The key in the effectiveness of short term loans is their ability to provide simple and fuss-free access to borrowing, in times when only a small sum of money is required. Providing consumers use these loans in the manner for which they are intended, they are able to provide a useful way of covering the cost of an unexpected expense. Typically, the loan values being considered in this lending bracket range between £100.00 and £300.00 which means the reason for borrowing should be reflective of the amounts available. This means when considering short term loans, the purpose for borrowing is no more than the resource on offer. The type of costs then that short term loans may be suitable for could include broken electronical appliances from around the home, a car repair or an unexpected one-off bill. Providing consumers are able to select this resource for the right reasons then, there is every possibility the loan will fulfil its requirement.
As we have already mentioned, short term loans tend to be available for small sums, usually ranging from £100.00 to £300.00. There are lenders who will consider loans for more than this, as much as £1000.00 in fact but often being approved for the higher loan values will be dependent upon having demonstrated successful repayment of a smaller loan in the past. The repayment terms which are available will be dependent upon the individual lender but flexibility is very much key to short term loans and as such, there is plenty of choice. Generally, lenders will offer a range of different repayment terms, based on monthly instalments. This means there are options which will allow repayments over a couple of months or as many as 6 months for example. The variation in repayment terms provides an opportunity to applicants to make affordable and sensible lending choices which means finding a repayment term and amount which can realistically exist alongside all other budgeting requirements.
The process of applying for short term loans is also in-keeping with the overall nature of the resource available and this is thanks to it taking place entirely online. By completing a simple and easy to follow application form online, an applicant can then be considered for a loan of their choosing. Usually short term loans lenders are able to deliver a decision as to the outcome of the application within the same working day and sometimes within a few hours; in instances where the applicant fully meets the criteria of the lender. Although these type of loans are generally considered to be quick to obtain, this will not be at the sacrifice of the required checks being completed. In instances where further information or documentation is needed from the applicant, this will of course slow the process down until such time that it is provided.
There is a good selection of different products which are available from payday loan lenders nowadays. It would be fair to say this was not always the case but changes in recent years have transformed the market into one which once again is able to support the short term borrowing needs of customers. Since 2014 and when the FCA became the regulators of the sector, a number of key changes have unfolded which has meant that today’s lenders are better equipped to support consumers and those unable to do so effectively have left the market. Whilst payday loan lenders still offer a specific type of borrowing, the manner in which they do so has certainly changed and by that, I mean improved. Today let’s look at payday loan lenders in some greater detail and doing so hopefully gain a better understanding of how the market now operates.
For those of us looking to borrow a small sum of money, the payday loan lenders might just be a suitable option. Nowadays consumers are offered flexible and varied lending options which are available via easy to follow and clear online application forms. Most lenders aim to deliver a lending decision in a timely manner but will not sacrifice their required checks in order to deliver a loan in a quicker time frame. Most lenders not only offer a range of different loan amounts but also flexible repayment options also. This means as customers we have several repayment options at our disposal, based on monthly instalments. Depending on the lender, this could mean a 2 month repayment term or anything up to a 6 month repayment agreement for example. The repayment term available will always have the loan value factored in; meaning where a £100.00 loan is offered over 3 months, a larger loan, say of £500.00, may also be offered over longer terms of repayment. This consideration, like so many along the way of the application, are based on the importance of affordability.
Affordability in the context of payday loan lenders means assessing the applicant’s ability to afford the loan. This means lenders will complete a series of different checks to ensure each individual applicant is able to afford the loan and repayment term being requested. Without affordability assessments during the application process, it would be very difficult for lenders to effectively meet the core requirements of the FCA. This is why many applications will now include the requirement to complete a budget; detailing all current income and expenditure. This information, along with experience, knowledge and through reviews of the applicant’s credit, will lead lenders to calculated and informed lending decisions. Without offering instalment style borrowing in all honesty it would be very difficult for lenders to offer realistic and affordable lending options to consumers. The restrictions of the original product meant that repayments were too costly and realistically, not many consumers could affordable them. Nowadays and thanks to the introduction of the FCA and instalment borrowing, the market as a whole is a much better place.
Short term loans are a method of borrowing a small sum of money. Short term loans are therefore best suited to immediate costs and not designed to serve the on-going costs some consumers face. It is important to recognise this simple fact because it is fundamental in ensuring these loans are truly suitable. Where someone may consider a traditional bank loan for the purchase of a new car, a short term loan would be better suited to cover the cost of a one-off car repair. With this in mind, this is why short term loans have a very specific application and approval process, which is not designed to mirror that of larger lending resources. The loans available here range from £100.00 to £500.00 in value with some lenders offering both smaller and larger sums, depending on the applicant and specific service of the lender. Equally the terms of repayment on offer here do not mirror the terms which are offered by larger and longer term lenders; like a credit card provider for example. Instead short term loans lenders look to serve the needs of consumers looking to repay their borrowing in a period less than a year. As such, there are often repayment terms which extend over a number of months, starting from just one. This means if suitable to do so the loan can be repaid in a single instalment or 3, 5 or 6 monthly instalments for example. Ultimately although the resources on offer from short term loans lenders are small, the idea is to offer flexible and consumer friendly borrowing choices.
So what then are the application steps required for short term loans. As mentioned above the application process begins with an online based application form. The forms myself are aimed at allowing consumers to submit an application with confidence, meaning all the required information is displayed accurately and clearly. Modern website designing means the entire application can often be completed in as little as only 5 minutes. Once submitted, short term loans lenders will use a series of well-established and knowledge driven decision tools to decide whether the loan requested is suitable and can therefore be approved. Usually to reach the decision, the lender will conduct these checks on both an electronic and manual basis. This means not only will a computer programme assess the application but so too will a designated Underwriter. Often many applications of this nature will not even reach a manual Underwriting stage if the electronic checks are not successful in the first instance; this is therefore why a lending decision can often be given in a timely manner. Most lenders will aim to approve (or decline) an application within a matter of hours and certainly the same working day. However, applications will only be granted as successful in instances where all of their required checks have been passed. Short term loans lenders will never skip any of their checks in order to speed up the application process as a whole.
I can never ever even begin to stress enough at just how important affordability is on finance. If people are unable to afford the finance then the chances are repayments will have to be missed on the debt. Missing loan repayments on loans or other borrowing will nearly always result in severe negative consequences for that person and because of this most people will always want to avoid this from ever happening. It will never matter whether a person is borrowing payday loans or other short term loans, instalment loans, credit cards or even mail orders they must be repaid back as agreed to the financial lenders. Below is a detailed way of how people can budget for the finance to make sure it is affordable and also how some finance types are more easily repaid than others.
If a person can locate what their disposable income is on average they can use that amount to see if finance can be taken out and then can be affordable. This amount of course could vary from month to month however, it still should state whether finance is affordable. People locate the disposable income also known as the spare income by looking to the month coming ahead, then adding up all their income for that period. This can include their salary, plus any benefits they are due for that period etc. Then from that figure the same person over the same time frame can deduct all their monthly expenditure. This in turn can include their rent costs, any debts they may have as well as living costs such as transport and food cost. Once this full calculation is done then the amount left afterwards is that person’s disposable income. Now if that figure is high then the chances are finance is affordable however, if low or if it does not cover any payment that is due on a debt then no application should even then be considered for this or other unaffordable finance such as short term loans.
It can be common that some finance types are then must more suitable than others to repay. People will have their disposable income and although this may change slightly from month to month this person should know what they have each period to themselves after their bills are paid. Of course then some people have much more disposable/spare than others. If people borrow money they may soon establish the fact that some are more affordable and realistic for their financial situation than others. Take payday loans as the borrowing example, when these are obtained people are often required to clear their debt in one go just as soon as they are paid again from their employer. Now for some people repaying a loan back in full as well as paying other bills can be tough and for some people it is just not affordable. There can now then be other short term loans where similar amounts are borrowed but then people can spread the overall cost of the debt so they can repay back over a term that suits them. This may then turn out to be a much better financial option.
There can always be times when someone needs money and most likely this can be down to so many different reasons. There can be some people who may need 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 even looking at putting money towards a new house etc. There can then in contrast be others who may just need a small amount of money to possibly just tide their finances over until they are next paid from their employer or they just need some additional funds to pay a bill perhaps. Now regardless of what anyone ever needs any amount of money for, if they have this saved away they can then look to use this as required to then pay for whatever they need. Some people may then even have enough money saved to pay for their requirement outright. Turning to savings is always nice whenever possible but for everyone this is not the case. In these instances people can then have to borrow the money. Short term loans for instance is just one common popular borrowing option.
In recent years I have found that short term loans are becoming more and more popular as a way to borrow money. This is a way people can borrow amounts usually up to £500.00 or more in some cases for people to then repay the debt back over a number of different repayment terms. The terms offered on this finance is normally offered over a minimal repayment terms hence the borrowing term short term loan. For example any loan that is repaid over longer than twelve months cannot be classed as that way of borrowing. These loans are never to be used for a long term financial solutions and are most likely aimed at helping people out in a financial emergency for example paying one of those unexpected bills as mentioned earlier on.
When a high number of different people think about short term loans they will most likely think about payday loans. These when obtained they will be required to be repaid back to the lender with high interest just as soon as the person is paid again from work. This as a result can be tough for certain people to manage and at times repaying any loan in full with other financial commitments is just not realistic and affordable. Other short term loans could then be a much better borrowing solution. Take 3 month short term loans for example, similar amounts can then be borrowed to that of payday loans however, here people can then repay the debts over a longer period. This gives people then the flexibility which is always going to be a positive factor rather than a negative. Always remember that with any instalment loan, the longer it takes to repay the loan the more interest charged on the finance overall.
Affordability is always so important on finance, if someone borrows finance from the financial market place and it is not affordable then the chances are repayments somewhere will be missed. Missing loan repayments and on other finance will nearly always result in severe negative consequences for that person involved and most people will always want to avoid this from ever happening if at all possible. Whether someone has taken out and borrowed short term loans such as payday loans or possibly instalment loans or even credit cards typically over longer periods the debts must be repaid. They have to be repaid as agreed with the lender in the first place. Below is steps on how people can check the finance is affordable but also how some borrowing types is more affordable than others.
I personally have found that if someone can locate what their disposable and spare income is on a monthly basis on average they can test whether further finance is affordable for them to maintain. People will often know that this income amount can vary from month to month however, it still should always provide a good understanding as to whether the finance is affordable overall. A person can locate the figure by looking to any month coming up ahead, they can then add up all their income expected for that period. This can include their work employment salary, any benefits they are due or credits etc. All credits due for the set period of time must be listed here. Then from that amount the same person over the same time frame can deduct all their outgoings. This can then include their mortgage/rent amounts, any debts they may have, any transport and food costs for that period must also be listed with all other expenditure and everything must be include. The figure left after this calculation is the spare and disposable income. It is that amount that will be used to see if finance is affordable. If someone has a high disposable amount then they are far more likely to be able to afford any short term loans or other finance.
It can be common that there can be a high number of different borrowing types that are more affordable and realistic for someone to pay than others. Take the short term payday loan for example. When these are borrowed by someone, that person must repay the debt back just as soon as they are paid again from work and they have to repay the loan in full. For any person repaying a loan in full may not be easy and high interest is normally charged on payday loans making them that extra bit harder for certain people to repay. Apart from the full balance being due on these loans the other borrowing options are then limited. People therefore when borrowing payday loans have to repay these loans in full as well as maintaining their other financial commitments and this is just not realistic for them and payments can then be missed somewhere as a result. There can certainly be other borrowing options that are more affordable than that of payday loans.
I can never ever even begin to stress just how important it is for people to repay loans and other finance when it is obtained. Failing to repay the finance will nearly always result in severe negative consequences for the people involved and most people will always want to avoid this from ever happening. It will never matter whether someone was to borrow short term loans including payday loans or instalment loans where potentially more can be borrowed over a longer period of time. Credits are another commonly used borrowing options as are mail orders however these must also be repaid and should be done so as agreed with the financial lender before the finance is approved. Below is three actions that can happen if the required debt payments are missed to lenders.
If a repayment is missed to a payday loans lender then that company has every right to contact that person to get the money they are owed. They can contact the person on all their contact numbers that they have available. That can include home, mobile and work numbers. With the latter method of contact it can be common that other people can find out about the money owed and no one would ever want this. Other methods of contact can be made from the lenders via texts and emails being sent to the now debtors. Again with those methods it could potentially lead to a third party knowing about the money being owed. For anyone being chased for money owed is always going to be stressful time for that person and is certainly something people should aim to avoid.
When repayments are missed on payday loans that person will have their credit file negatively affected. This as a result will often make it harder for that person to get approved for any borrowing further down the line in the future. When repayments are missed on the finance and not settled quickly the lender will mark this on a credit file as being down and then longer when the accounts remain overdue will then show as a default and this is bad for that person. Lenders when considering financial applications will carry out credit checks and can often have the ability to see a person’s file going back a number of years. If they were to then see accounts overdue they are far more likely to decline an application. Someone with good credit will be far more likely always to get finance.
Payday loans when borrowed from payday lenders will often be known by many as being an expensive way to borrow money for a very short period of time. When people are then due for the repayments the full balance must be repaid in order to settle the account. This can be tough and payments can be missed as they are times are not affordable for the borrower. When this happens it is common for lender to charge high interest and charges as soon as the account is overdue. Most payday lenders for example can often charge a late fee when the account is overdue for just one single day. This can be a problem if people then look to settle the debt in the future. When interest and charges get added to an account that is overdue, it can make the balance high quickly and when a person then can settle the debt he may have to pay back much more than what was owed in the first place.
In order to ensure any form of new borrowing is suitable, there are a number of different things we, as consumers, can do. In order to understand why these steps are important and really do make a difference, likes look at completing them in relation to a specific type of borrowing. For the purpose of this exercise we’ll look at payday loans. For anyone who is not aware of payday loans and what they offer, let’s first do a summary of the product on offer here. A payday loan can be used for a variety of different reasons given their flexible nature. Generally however, their uses are refined to smaller financial concerns, given the fact the loans available range from £100.00 to £750.00. The amount which is approved will depend on the individual applicant and their circumstances and the resources of the individual lender. The terms of repayment which are on offer again will depend on these factors but are generally considered flexible and give applicants a good deal of selection. As such, repayments can usually be made over a number of months if required, starting from a single and one-off repayment and then a selection of monthly terms. Today then let’s look at the things which we must consider when considering payday loans.
First and foremost, before any form of new borrowing, including the resources on offer with payday loans, we have to ensure the resource matches our need. This means making sure our reason for borrowing is suitable to the loan value and terms of repayment which are available. In simple terms this means making sure our reason for borrowing is appropriate. Where we would likely consider a credit card for a large purchase we may then consider payday loans for a small cost. Borrowing from a payday loans lender for a large cost will likely lead us into repayment difficulty at some point in the future. The second consideration is how affordable the repayments of a new loan will be to our individual circumstances. The best way to understand this is via the completion of a quick and easy to do budget planner. Completing a budget simply means listing all of costs against your total outgoings and therefore being aware of the amount which is deemed as spare. Obviously any new financial commitment, including payday loans, would need to come from this spare and ‘disposable’ income. This understanding your budget and what its limitations are well really made a difference to the overall borrowing decision you make.
Providing the right type of loan is selected for your needs and the repayments of the loan are affordable to your budget, there is no reason why a payday loan or any other type of loan cannot be a sensible choice. Lastly it is always wise to remember that the longer the term of repayment, the higher the total cost of credit will be. So with this in mind be mindful to select the shortest and most affordable term of repayment to suit your individual needs.