Introduction to Pay Day Loans

1
Introduction to Pay Day Loans
2
Pay Day Loans are essentially cash advances that
are offered to people in immediate need of cash.
These loans have known to be more inclusive than
long term loans, as they are reaching out to a
much larger customer base, including people who
cannot afford long term lines of credit. These
cash advances are usually meant for people in
times of crisis or in times of emergencies, where
the need for fast and easy cash is needed. The
advantage that these long term loans enjoy is
their policy of approval irrespective of the
credit history of an individual. This is the main
reason for their popularity.
3
Need-to-knows about Pay Day Loans Although payday
UK loans might tend to look attractive
considering the wide product range they offer and
the amount they are offering these loans for, one
needs to be very careful while choosing these
options. Let us discuss some of their features,
to enable you to make an informed choice while
doing so.
4
(No Transcript)
5
High Cost and Short Term Access to these loans
is relatively easy, as some people are using
these services even on their mobiles, however
these very features makes payday UK loans
dangerous in the long run. Their easy access
should be restricted, so that we realize that
these loans are to be used only for emergency
purposes and not as a substitute for your
income. The Role of APRs Many industry experts
have argued that displaying APRs can become
quite meaningless, as the amount that you might
end up paying as APR can be quite in contrast to
what has been displayed. Displaying the APR is a
legal requirement. Since these loans are borrowed
on a short term basis, the rate of interest/fees
can be quite high.
6
Ability to Repay It is extremely important to
know that if you are not in a position to repay a
loan, you cannot afford the loan. This is not to
be treated as an additional source of income and
since these loans look appealing, it becomes all
the more important to understand whether you will
be in a position to repay them in the
future. Roll over Position Although the roll
over option might seem easy, more often than not,
if you roll over a loan, the penalty charges and
the fees these lenders charge, is much higher
than conventional fees and tend to accumulate
over a period of time which can sometimes land
people into a huge financial crisis.
7
(No Transcript)
8
Credit Rating It is a common notion that
repaying a payday UK loan can improve your
overall credit rating. This is not the case. Pay
day loans have separate criteria when it comes to
credit rating agencies, it has been found that
although it may marginally improve your credit
rating, while youre applying for a mortgage
loan, and it does not make a large
difference. No Credit Checks Although pay day
lenders advertise no credit checks, this may
serve as more of a disadvantage rather than an
advantage. This means that a lender does think it
is important enough to check your capacity to
repay a loan, which means that it is not in a
position to guide you to manage your finances in
a responsible manner. This also implies that if
you are applying for another lender, he too is
not in a position to judge your lending capacity.
9
It is a well- known fact that when credit checks
are made, almost 60-70 applicants are turned
down in the process. Future of payday UK
loans Almost a decade after pay day loans have
been introduced in the UK, there has been
considerable debate over the future of these
loans. They were a popular option post the 2008
crisis, as the cash-strapped economy found the
offers to be far more attractive, since most of
the financial institutions have restricted their
lending capacities. There have been several
people lobbying for stricter regulations on pay
day loans UK, as surveys have indicated that
about 2 million Brits were using these loans for
meeting day to day expenses rather than emergency
purposes. Following these not so positive
developments, certain regulations have been put
into place in early 2014.
10
(No Transcript)
11
The first and foremost step is completely
transparency in advertising which includes all
the risks mentioned. Roll over limit reduced to
2. A freeze on interest and other charges where
the debt has been extended more than
twice. Continuous payment authorities have faced
strict criticism as it enables these lending
agencies to debit money from the borrowers bank
account without any warning.
12
What it means for the Lenders The proposal of
these regulations and the following cap on the
interest rates has seen many lenders leaving the
market. Some highly profitable lenders like Wonga
and payday UK have resorted to more transparency
in their process, and have introduced rigorous
checks in their application processes. There is a
need for the lenders to be more customer-friendly
and companies like Pay Day Uk have adopted
measures which have led to responsible lending.
Let us discuss some of the changes they have made
in the process. No lending to students or
minors. Doing a thorough check of the applicants
to see if they are in a position to repay their
loans. People with debt problems are a strict
NO. No dealing with people whose identity is
questionable.
13
(No Transcript)
14
Overall View Companies like payday UK have been
responsible in their lending policies and have
ensured that customers are fully aware of the
limitations and risks involved with pay day
loans. Their application procedures have also
become more stringent ensuring that the
applicants are in a position to repay the loans
within the stipulated period of time, preventing
any defaulting on their part and in turn
maintaining a certain amount of credibility. This
builds confidence in the minds of the customer,
as he feels that the lending agency is more
interested in guiding them rather than taking
advantage of their poor financial conditions.
15
For more information visit us
www.trueblueloans.co.uk
16
Thank You