Payday loans have had their fair share of bad press and negative publicity over recent years, from high interest rates to their unrealistic repayment terms , but are they really as bad as they are made out to be. There’s no secret about it, many payday loan lenders have taken advantage of financially vulnerable individuals which has lead to a number of high profile court cases and record breaking fines for a number of leading lenders such as Wonga.
In arguably the biggest high profile court case for the lending industry, the UK’s leading lender, Wonga; was forced to write off over £220 million to more than 330,000 customers. The record fine came on the back of Wonga admitting to manipulating affordability checks, in every day terms, accepting as many people as possible even if they can not afford to make repayments.
Since then the payday loans industry has been subject to a number of government investigations and have undergone a huge reform under regulation from the FCA (Financial Conduct Authority). Short term lending has been changed forever under the new responsible lending policy reforms with many changes being introduced with immediate effect:
Interest Rates Caps
A new 0.8% daily interest rate cap was imposed by the FCA in a bid to prevent snowballing costs associated with taking out a payday loan. The new cap ensures that all UK lenders will need to abide by the new interest rates or face action from regulatory action from the FCA. The introduction of the new 0.8% rate has ensured that payday loans are more affordable than ever, a move that the FCA has credited with ensuring the growth and future of the short term lending industry
Loan Eligibility Checks
Payday loans eligibility checks were introduced by many lenders to ensure that customers were only accepted should they meet certain criteria. The new criteria checks ensure that individuals will not be thrown further into financial insecurity by failing to make payday loan repayments. Checks on employment history, homeowner status and monthly income are all taken into consideration when applying for a payday loans. The most common eligibility checks are listed below:
- Credit History (Some Lenders including Lucky Loans will not carry out a credit history check)
- Emplyment Status
- Homeowner Status
- Number of Dependants
- Monthly Income
- Total Monthly Outgoings
- Other Loans Outstanding
- Date of Birth (Minimum age of 18)
Flexible Loan Terms
Payday loans used to be an alternative finance option until your next paycheck with the borrowed amount automatically deducted in full from your account on your next pay date. Many lenders now offer flexible loan terms with the option for many customers to make loan repayments over 3 months in order to make the borrowing process as affordable as possible. This latest product offering has seen a new wave of personal loan lenders now breaking into the growing payday market with longer lending terms added into their product offerings.
The truth is payday loans are now more affordable than ever as a result of the new responsible lending guidelines and interest rate caps. The new repayment terms have revolutionized the way many people view short term lending with very flexible lending options.
Payday loans from Lucky offer short term borrowing solutions with flexible repayment terms on offer to many applicants. In comparison to many leading high street banks, Lucky Loans offer a 15 minute cash transfer option for successful applicants as opposed to the 5 day turnaround that bank bank or building society offer.