As Christmas approaches and we all may be considering a short term or payday loan, how has this particular aspect of the lending industry responded to the challenge of responsible lending? The Financial Conduct Authority (FCA) has to a certain extent, re-regulated the short term loans industry over the past 12 months, so what does this mean for the payday loans customer, is it a better idea to go for a longer term unsecured loan and where are the best places to go?
The FCA introduced an initial cap of 0.8% per day interest on the total amount borrowed, and insisted that all consumer finance lenders show the benefits of responsible lending. The FCA guidance allowed lenders to show consumers that their products may be able to help them based on their current situation, such as if they need a short-term borrowing solution and are working full-time.
Perhaps the biggest challenge however was repeat and ‘roll over’ loans. These customers could not really afford the repayments and so took out several different loans at several different lenders. Responsible lenders are always looking to help customers who can afford to repay, and a lot of them now use free repayment calculators on their websites to help the customer make an informed choice. These repayment calculators demonstrate a desire to lend responsibly to those that can afford to do so, as it is easier to visualise whether a loan is right for you based on how much you will be repaying every month.
Perhaps borrowing from family and friends is another option. According to the debt charity StepChange, the UK is now a nation of renters, not buyers, and those in rented accommodation face different challenges than homeowners. Any late rent payments means that it is fairly easy to become evicted, hence why many approach family and friends for loans. The benefits are obvious, they are friendly faces who you know and trust, and hopefully they trust you too.
However, the reality is that even the closest of relationships can be affected by money, especially if the amount is not paid back on time. This is why short-term lending has boomed in post-austerity Britain. By choosing a responsible lender, you should be able to get out of any financial problems, and it keeps your financial affairs private whilst maintaining your personal relationships. Any short-term loan or lending is an option that gives consumers some control over their finances instead of succumbing to the stress of not having the cash.
Banks may be another option, but the lending criteria is often extremely rigid, especially if you have less than perfect credit. However, the consumer finance industry has changed and evolved a lot over the last 10 years, and has changed how people deal with their finances. Before you would apply to access cash, today you search for the right finance deal for you depending on your lifestyle. Consumer finance has made borrowers at the heart of their money, and there are now more products and services offering everything from mortgages to unsecured loans. As a company, we have an extensive panel of lenders who can help identify your needs and best match it to one of their products.
All things considered therefore, borrowers eventually have to ask themselves is show term borrowing worth it and where is the best place to go? It is better to have some options than none at all and fall into increased financial difficulty. Money helps you achieve your goals, and short-term loans can help you in cases of financial hardship. The key is to always choose a responsible lender, and to only borrow when you really need the help. That’s what the lender is there to do, help you.