Interestingly, they have found that the effective regulation of short term lenders is producing “substantial benefits” for consumers.
The July 31, 2017, summary of the FCA’s findings notes that 760,000 borrowers, now save an average of £150 million each year. Is this from the lenders who are offering payday loans with no credit check?
Or by responsible lenders who are keeping the best interest of their customers at the forefront?
“Responsible Lenders Raise The Standard Of The UK Payday Loan Industry Without offering Payday Loans With No Credit Check”
With the FCA ready to extend its current approach through to 2020, the future could bring even more positive news.
Consumers who make informed, appropriate use of payday loans can count on enjoying the same kinds of benefits and security.
As a responsible direct lender with a transparent lending process, MoneyBoat regularly helps consumers obtain financing that they can use to overcome occasional, short term financial hurdles.
A More Mature, Responsible Short Term Lending Industry
The payday lending industry has grown quickly in the United Kingdom. One widely cited estimate describes how 2004 totals of about £100 million rose to £1.7 billion by 2010.
Even so, the latter figure represents only a small fraction of the £200 billion in consumer credit that was outstanding at the time.
As in other countries, payday loans in the UK carry high costs and are meant to be repaid quickly and taken out only when necessary.
In the early days of the domestic payday loan industry, regulations were light, leading to problems for some borrowers. This was not helped by lenders who were offering easy access payday loans.
The FCA adopted a more active approach to the regulation of short term loans starting in 2014. Since then, issues like these have become less common. Many lenders who formerly dragged down the industry’s reputation have been forced out of business.
This is due to their inability to comply with the new rules. With responsible lenders who emphasise ethical dealing now being more representative, occasional use of payday loans has become a better borrowing option.
Finding the Right Short Term Lender to Work With
While this better regulated industry is a much more hospitable place for consumers, borrowers still do well to seek out the short term lenders who will serve them the best.
Financial emergencies can tempt borrowers to pursue the first opportunity they find, but even a bit of research into the options will pay off.
Simply understanding a few basic issues can make a productive short term borrowing experience a lot more likely. Borrowers do well to recognise, for example:
- What credit checks cover and how they influence loan terms
- The differences between brokers and direct lenders
- What it means to be a responsible lender and how borrowers benefit
What is a Credit Check and Why Does It Matter to Borrowers?
A lender can never be absolutely certain that any borrower will be able and willing to repay a loan. Whether because of a lack of financial means or simple irresponsibility, some number of borrowers will default on their obligations.
Short term lenders, just like others, have to be confident of recovering the money they lend out if they wish to stay in business.
If certain borrowers fail to repay their loans, fees and interest paid by others must make up for any associated losses.
If every loan applicant were just as likely as all others to repay, loans could be responsibly approved with no regard to individual circumstances.
Information about financial circumstances and histories, though, can help highlight those borrowers who are most likely to repay.
Illegal or unregulated Payday loans forgo this important tool. As with many other responsible lenders, MoneyBoat uses a standard, discreet credit check process to inform loan approval decisions. MoneyBoat loan officers assess credit-related information provided by Call credit Information Group Limited before extending any loan offer.
This Requirement Benefits Both Borrowers and MoneyBoat As A Responsible Lender:
- Borrowers benefit because better informed lending decisions allow loans to be issued with lower fees and more flexible terms. Instead of needing to impose rigid terms to account for the uncertainty involved, MoneyBoat can be more accommodating. From being able to change due dates to interest rates below the statutory limits, credit checks enable concrete benefits for consumers.
- Borrowers also benefit because credit checks help prevent them from taking out loans that are beyond their means to pay back. In certain cases, having accurate information about a loan applicant’s financial situation will allow a responsible lender like MoneyBoat to provide an important service by declining to extend an offer.
- Lenders benefit because the information and security credit checks afford them to build stronger, more service-oriented businesses. Many of the unfortunate stories of the past involve short term lenders who felt forced to leverage every possible advantage in dealing with borrowers. Quite a few of these less-responsible companies have since been pushed out of business. Credit checks help today’s short term lenders focus on serving their clients in transparent, informed, mutually beneficial fashion.
Unregulated or easy access loans can seem appealing at first glance, but they do come with costs. Loans that include some form of credit check can be obtained fairly and provide significant benefits.
Why Working with a Direct Lender Instead of a Broker Makes More Sense
As a direct lender with FCA registration number 674154, MoneyBoat provides and services the loans it extends to clients. There are also loan brokers who serve as intermediaries. These companies refer would-be borrowers to lenders in exchange for commissions or fees paid for leads.
Choosing to work directly with a lender will generally make more sense for most borrowers. Short term lending brokers can detract from the overall value of a loan by:
- Driving up costs: Brokers have no ties to their clients beyond passing them on to lenders. Because of this, they put their own interests first. In many cases, this will mean encouraging clients to accept loan offers that will be more costly or less suitable than other options. With another party taking a cut, loan costs go up.
- Slowing down the process: Brokers can also make it more difficult and time consuming to obtain a loan. Brokers may claim to expedite the process, however it could work to their advantage to pass on an applicant’s details to many lenders. This could lead to delays and hassle. Working with a direct lender like MoneyBoat would not bring about these issues.
- Being less transparent: Lenders with money on the line have the incentive of keeping their clients well informed. Brokers who are focusing on volume may be inclined to distort information in order to earn a commission or fee. Even where regulations require transparency, the ease of setting up a loan brokering business compared to a registered direct lender can work against the interests of borrowers.
What Does This Mean To Me?
For these reasons, borrowers often benefit from skipping the middleman and working with direct lenders like MoneyBoat. Short term brokers have the skill of attracting attention, but may come up short when it comes to delivery.
The Right Lender Helps Borrowers Make Responsible Use of Short Term Loans
Most importantly of all, as a leading UK lender, Moneyboat commits to treating every borrower with respect. This is one of the reasons that we can not offer loans without a credit check – we value our customers financial lives beyond their loan. Borrowers who work with such a lender can be more confident of using short term lending in responsible, productive ways.
Being a responsible lender like MoneyBoat means ensuring that every borrower receives:
- Information that helps them decide whether a particular borrowing opportunity will suit their needs. Fast short term loans may come with high costs which is why you should use this option for emergencies. MoneyBoat takes great care to ensure that each applicant and borrower understands all the relevant terms and considerations.
- Options that allow borrowers to tailor their payday borrowing precisely to their needs. With loan amounts ranging from £200 to £800 for first-time borrowers, qualifying return customers may borrow up to £1500. Customers can choose from a variety of repayment terms and instalment options and may pay back their loans early without penalties.
- Service that reflects a commitment to helping borrowers use short term loans responsibly and productively. Our positive, borrower-oriented approach to payday lending puts the interests of our clients first
- From our secure, streamlined application process to the advice offered by our informed, professional underwriters, borrowing from MoneyBoat means making the most of a powerful financial tool.
Could Payday Lending Be an Effective Method For You?
The new FCA report describes how short-term borrowers are saving money and running into fewer associated problems. This shows that making responsible use of payday lending in the UK can be an effective way to deal with occasional financial difficulties. Seeking out a service-oriented direct lender like MoneyBoat will make success even more likely.
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