What is responsible lending?

Responsible lending is all about ensuring a borrower is able to repay a loan before offering credit. Responsible lenders also need to be clear and upfront about the cost of borrowing, and extra charges and fees payable. They will usually offer support and great customer service to borrowers who are struggling to repay loans as a result of financial problems and they will undertake thorough creditworthiness checks before lending to prevent these financial problems from occurring in the first place. 

Payday loans no longer mean unscrupulous lenders preying on vulnerable borrowers. The Financial Conduct Authority (FCA) clamped down on this behaviour and the entire short-term loans market has had to clean up its act. However, there are always a few businesses that slip through the net, so here’s our quick guide to avoiding the scams and finding responsible lenders.

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Quick-look Guide – finding responsible lenders

When offering payday loans, UK direct lenders should act responsibly in the following ways:

  • Lenders should be open and honest on their websites to give potential customers all the information they need to make an informed decision.
  • Lenders need to ensure that applicants understand all the details of the loan they are applying for before granting them funding.
  • When borrowers apply for a loan, lenders need to carry out thorough creditworthiness checks in accordance with the FCA handbook.
  • Affordability checks should also be carried out and responsible lenders will also do all they can to ensure they get a realistic picture of the applicant’s income and outgoings.
  • Responsible lenders should offer loan amounts and terms that are affordable and agreeable for the borrower.

When searching for direct payday loans, look for lenders that:

  • Have well-maintained websites, with clear and accessible terms and conditions.
  • Offer information on their eligibility criteria
  • Carry out credit checks and affordability checks before offering loans
  • Are registered with and authorised by the Financial Conduct Authority
  • Clearly state that they are responsible lenders

Why high acceptance payday loans direct lenders aren’t always such as great idea

If you feel that your credit score could be better and that you may be turned down for a payday loan with a lender that carries out credit checks, seeking out a lender that will offer bad credit payday loans isn’t recommended. If you take a loan that you can’t afford to repay, you could quickly build up an even greater debt from additional penalties and interest charges applied to your account. 

Think about how your credit lender would respond if you couldn’t pay

Lenders offering high-acceptance payday loans may also fail to follow responsible lending regulations with regards to how they treat customers who are unable to repay on time. These lenders have been known to threaten borrowers with court action instead of supporting them and referring them to free debt advice.

Looking for a direct lender loan on a realistic payback schedule?

Warning: Late repayments can cause you serious money problems. For help, go to moneyadviceservice.org.uk

Representative Example: Borrow £400 for 4 months, four monthly repayments of £197.48. Total repayment £597.48, interest rate p.a. (fixed) 255.5%. Representative APR 939.5%. Compare Moneyboat loans.

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