Payday Loan Improvement: Has Regulation Truly Made A Difference

Payday Short Term Loans That Make Sense

Payday Loans were created to ease the financial pressure that workers face before they receive their pay cheques at the end of the month. The short term loan would be paid directly into the worker’s bank account before they were expected to repay in full, with interest, when they eventually received their pay. The type of loan came under much scrutiny, with critics citing that it made it too easy for a vulnerable person to ‘over borrow’ and therefore, face long term financial hardship. It was as a result of this condemnation, that a series of laws were introduced in an attempt to regulate payday loans.

We’re going to explore those very laws and examine whether the regulation made a difference.

Which Regulation Was Introduced?

The Financial Conduct Authority (FCA) was the organisation responsible for the regulation introduced into the payday loan market.

The first action the FCA took was to introduce a cap on interest rates charged on loans, which were frozen at 0.8% per day the amount borrowed. There was also another condition added, that no borrower should have to pay back more than twice the amount of their original loan.

They also regulated and reduced the fees that payday lenders could charge for arranging a loan, as well as introducing a cap on the borrower default fee, meaning that if a borrower failed to meet the conditions of their loan, they could only be charged a maximum of £15.

The FCA’s final ruling was that each payday lender had to list their loan rates on at least one price comparison site to prove their legitimacy, as well as improving competition and price transparency within the market.

Did The Regulation Make A Difference?

These interventions went a long way to making the payday lender industry far more legitimate; however there is still room for improvement which was detailed in a report published by Citizens Advice.

They found that after the caps and regulation were introduced, that borrowers were far less likely to find themselves in extreme financial difficulty, provided that they communicate to their borrowers that they were having trouble repaying their payday loan.

The 44% of borrowers who were experiencing difficulty in paying back their loans, but actually spoke to their lender, managed to agree a more affordable alternative repayment plan.

This statistic illustrates two points; the first is that lenders are more than happy to provide alternative options for borrowers provided that they tell them they are experiencing problems. The second, however, is that more than half of borrowers are unwilling to voice their concerns regarding repayments, due to the fact they perhaps feel embarrassed or ashamed at their inability to repay their loan.

Therefore, while payday lenders have clearly improved their methods for making loans easier to repay, work can still to be done in regards to the line of communication between lender and borrower.

Ultimately, it’s clear that the payday loan industry has evidently improved after regulation, however it’s still not perfect, and things can still be done to better the industry for both lenders and borrowers.

 

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7 Essential Steps to Get the Best Interest Loans Out Of Personal Loans

Everybody faces a personal financial crisis at least once in his or her lives. Your next payday may be miles away considering your emergency and this may force you to find a good solution for yourself. Borrowing from family is a no go zone and the first resort is to find a personal lender to sort you out. Personal online loans are easier and quickly given compared to other types of loans.

In this article, I am going to highlight to you 7 steps you should follow in order to find personal loans with the best interest loans out there.

  1. Consider The Purpose Of Your Loan

Knowing exactly what the loan is meant for is a good start. Emergency loans are offered on basis of trust and the relationship you have with the lender will determine a lot. Many personal loan lenders nowadays prefer to be provided a reason for the loan application. Therefore, you need to provide a good reason why you should be granted an online loan. Good reasons for a personal loan include medical expenses and other emergency occurrences.

  1. Do Your Research

This can come as easy as going online and searching for good personal lenders for you. You should always opt for lenders who have lesser interest rates. Lower interest rates are what you are searching for after all. Make a list of potential lenders you find and evaluate each. However, you should avoid lenders with abnormally low interest rates since their legibility is questionable.

  1. Borrow From Your Bank

You should take a personal loan from an institute that you already have an account with as they already have a good relationship with you and they will offer you better options, which include friendly interest rates.

  1. Check Your Credit History

Your credit history provides lenders with an image of how you have related with previous lenders. Bad credit history will make personal loan lenders to give you fewer options with exorbitant interest rates so be sure to check on your credit history and make corrections.

  1. Chose A Shorter Loan Repayment Period

While applying for a personal loan, you are advised to go for options that offer shorter repayment periods since they have lower interest rates. However, you should choose a repayment plan that suits your income since you do not want to stretch your income. You should before making an early repayment since some lenders do have a penalty for this.

  1. Pay Your Loan On Time

Paying your loan on time will prevent you from being charged higher interest rates on your balance and also making sure, you maintain a good credit score.

  1. Borrow The Exact Amount Needed

This may not be a factor, that lies with the lender but it ensures that you are not charged interest on additional amounts you did not need. If your medical expense costs $2,000, it is always advisable to borrow no more than that amount.

 

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