How to Budget for a Lending Stream Loan

In our modern economy consumers are becoming increasingly better able to manage their costs on a weekly or monthly repayment basis, for the vast majority this is monthly. This means the things which perhaps were previously repaid on an outright basis, are now being managed via affordable monthly instalments. Take for example car tax or TV licensing, two everyday costs which many consumers now prefer to manage on a monthly basis instead of having to make an outright repayment once a year or so on. This applies to many areas of our expenditure, whether it be car insurance, online purchases or our mobile phone costs. In fact in our modern society many consumers simply do not have the resources to make normal living costs in a single and one-off repayment. As the years have passed consumers have applied this logic to manage of lending too and this is particularly the case with short term loans, such as those offered by Lending Stream.

Lending Stream is a typical example of a short term loans lender who offers the ability to borrow a small amount of money online. Short term loans have been available online for nearly a decade but the product present today is very different to what once was. In the past short term loans were based on a single repayment offering, this meant consumers were granted a small loan on the understanding the full amount would be repaid on the agreed date. Like so many things and as time passed it became clear that it was difficult for a large proportion of consumers to effectively manage and repay this style of repayment and in the last year the type of product has changed. Nowadays consumers using the likes of Lending Stream can expect to be offered an instalment loan.

Taking Leading Stream as an example they offer their potential customers the opportunity to borrow a small amount of money, typically in the region of £300.00 to £400.00 to then be repaid over 6 monthly instalments. This means like so many lenders, they have moved away from asking their customers to commit to a lump sum repayment. By offering 6 monthly instalments it is clear what level of commitment the company is asking and in doing so makes the loan generally easier to budget for. Any applicant considering such a loan needs to assess and understand their budget for the next 6 months going forward. This means ensuring as potential customers, we know what the demands and restrictions of our existing budget are.

This means ensuring having accounted for the costs linked to our normal living expenses, such as rent, travel, food or existing credit that we have the means available to afford the 6 instalments which will be set out to us. The best way of understanding this is to complete a simple budget listing all our outgoings versus incomings and calculating the proposed repayment to be deducted from the amount which is remaining from these two amounts.

The New FCA Regulations and Their Impact

The financial market felt a significant shake down as the Financial Conduct Authority introduced new payday loan directions for standardizing high cost short term credit.  The regulations implemented were aimed for controlling unlawful loan hunters from ripping off or misusing the current circumstances of the customers, and ensuring that their benefits remain secure, however the effect of these regulations is yet to be seen.

The Influential Regulations introduced in the latest papers released by FCA  :-

  1. The total initial cost applicable including interests and other charges only will be 0.8 of the amount of loan taken.
  2. The interest on unpaid amount is decided to be nothing less or more than £15. This initial rate will always be higher than this default amount.
  3. The new regulation also ensured that in any possible situation the consumer will never pay back the loan amount which is more than double of the amount borrowed.

Under the influence of FCA regulations the already unregulated business sector became united, moreover the consumer funding techniques incorporated both loan based and investment based consumer subsidizing. With effect of these upgraded regulations all the loan lending companies started feeling their responsibility on the facts with which they used to entertain the customers who came to them is search of financial slots and for the services they promised to sell. A legitimate permit was released for many of the organizations which were subjected to word under the Financial Conduct Authority. Commission based offices got to be banned under FCA regulations and furthermore in the lights of caps proposed by FCA, many big loan and finance companies marked edge of benefit got to be low. Only the big name financial companies and loan agencies who have shown the effect of their presence and were distant for low wage families generally, survived the trial.

FCA always wanted to have one solitary reputed big money lender and three other agencies supporting it and looked to filter all those finance and other payday lenders from loan market who were not sure of changing their business strategy and model. The regulation stated that a consumer would never pay more than £200 for a loan of £100

The Actual Motives behind the Acts

As per the speculations of FCA total of 7% of borrowers in UK never had any actual reason to borrow money. The FCA regulations proved to be the blessing for more than 70,000 consumers who used to seek financial support from payday lenders. The effect of the new rules was seen when 35 % of borrowers were cut short from the plates of payday lenders.

FCA Regulations

FCA Regulations

The Loop Holes in New Rules

FCA didn’t look that active in controlling the high rising ramifications of ARPs while they it did put a cap on payday lenders but ARP has no one to check after it and assist it.  The situation is that if someone buys a loan of 100 bucks, then he would have to pay a high interest of 20 bucks in every couple of days. Know this may didn’t look that much of a problem for high class, but is certainly as alarming situation for middle and low class families who have to choose whether to eat dinner or to pay their bills.

The new regulation marked a dead end for many payday lenders and not more than four organizations were able to survive the cap applied by FCA.  The agencies who managed to turn to face the situation easily have already changed their loan lending limits and or were already dealing in a less than market rate.  Now the catch is that with so many companies closing their shutters which marks most of the customers will drive their money acquiring needs from the only survived high end agency, which will give them a 100% monopoly over the financial market. Zero competition and lack of options will drive consumers in a straight line to the already crowded agencies which will also mark the downgrading standards and lack of service support to the customers.

The rules which were enforced to help the low income families in the long run will only make things worse for them. The 70,000 applications which were found inappropriate for short term loan under new FCA regulations will have to look for other sources. And as per trusted sources 2% of these consumers that is 1400 people move to the loan sharks who is return greet them with high interests, and these payday lending’s are impossible to track so most of these loans will never get noticed, which is also a big loss for FCA.  Moreover with new regulations there will be chances that people may not get the full amount as expected by them, and for the left money they will turn to illegal loan sources. FCA needs to understand that the high priority rules which were introduced could only benefit the primary consumers if they can motivate consumers against illegal and unregistered loan agencies.

The FCA Regulations in UK

The cap proposed by Financial Conduct Authority works at only a single pound less than the original charge lending companies were working at, this implies there has been hardly any effect of the practices of the high end lenders. The claim that there are only 240 such loan agencies were in action has been proven incorrect by the current revelation of the numbers which is 400. Getting the numbers right is crucial to regulating the market correctly. The result of the declaration of new rules regarding high cost short term credits has been very ambiguous. However if it is seen with respect to implementation of these regulations, it was a success. But things behind the scene were very different to what it was on the records, and things only became worse. The majority of unregistered loan and financing agencies continue to eat the benefits of consumers.

It is understood that consumer who takes out a payday credits doesn’t falls into faulty pay day  lenders, however it does happen regularly, on the grounds that the structures and terms of the advances are out of line, the plan of action itself is broken. Giving the value top is insufficient to guarantee this model quits working. This is the reason FCA ought to make significantly stronger moves to secure shoppers in Britain, to control the endless loop of obligation that happens because of these advances.

FCA Regulations in UK

FCA Regulations in UK

Things have changed really dramatically with the introduction of new regulations by FCA for high cost short term loan deals. The rules have been very deeply refined to promote legal loan agencies and to encourage the consumers to go for the legitimate sources rather than moving into the traps of illegal and unmarked payday lenders who were monetizing on the middle class and low income population and were manipulating their benefits to the limits. FCA made its intentions clear that it will not show any mercy on agencies which will not follow these new directions and its effect can easily be seen that now only four main leading agencies are recognized by the organization.

 

These quick and effective regulations did strike the unregulated agencies pretty hard and in its response all these agencies united against FCA, however it was left unnoticed.

The Financial Conduct Authority has made its thoughts clear about penalizing unregistered payday lenders, and defined a steep line for all the loan and financial agencies to follow. Many ungoverned agencies are trying to manipulate their status and are redefining their meaning of High cost short term credit. What looks like an epic fail is that these agencies do not want themselves to be registered under FCA, which is making it more difficult for the authority to control them.

The Standardized Regulations by FCA

The cap introduced by FCA on loan and financial investment is settled to an everyday 0.8% and altogether 100% of the total amount of actual loan may have played an important role in fixing the upward limit. Payday banks charge buyers an APR of 1000% to 2000%, a ludicrous sum and this has not been topped. A ludicrous sum of 1000% to 2000% APR is charged by the pay day lenders which is also not stopped or governed. So banks still escape with charging such high premium rate to the buyers. In a brief time compass this APR will create a tremendous amount of interest on the consumer, which will adverse their financial condition.

The Reasons behind Dark Results of FCA Regulations

  • By changing the APR charges from 100% per week to 100% half yearly and giving a decisive offer to extend the amount of loan instead to issuing new loan, the unregulated money lenders are playing with the guidelines defines under pay day section, and are enjoying the flaws in the rules. As this keeps them away from the hands of FCA. Many of these unruly pay day agencies are ready to change their policies and terms for this purpose.
  • However a lot of defaulter money lending and investment companies were punished by the FCA and were banned from further business scopes, but the catch is that only the reported companies were treated. In UK there are a majority of such small-end capital companies which do not even have a license, which keeps them unnoticed from the eyes of the concerning authorities. The radar of FCA is only able to detect those who have a legitimate license.
  • The new regulation has played with the benefits of both the pay day agencies as well as the primary consumers. The Low income consumers generally don’t qualify the terms and norms of FCA for getting a loan by any agency which is registered. The numbers of people who fail in this process are about 70,000 and out of these people around two 2% who have the urgent needs look for unlawful sources. And this has kept the business of these unmonitored agencies in profit.

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THE IMPORTANCE OF SAVING

We all know the reasons we need to save money for, there are so many possible emergencies that could catch up with us any moment, so much expenditure that could make the month’s budget hard to keep a track of. These sometimes creep up to us at the worst possible moment and take a big chunk out of our savings. You don’t never need to have a reason to save money, because sometime in your life you will have a reason and use for it. No matter what philosophical shmucks say, money can buy happiness. The difference of you being content in life and being morose could be drawn by the bundle of cash you didn’t have.

But what if the savings was not there to cushion the fall? We could end up taking a loan with outrageous interest being charged on that, or could lose your house to mortgage because of unexpected expenses you couldn’t keep up with the payments for a few months. What if the bank takes away the vehicle because defaulted on a loan? Or you couldn’t get your child braces or the books she needed on time.

The reason for saving could be anything, but you can’t argue with the results of a good savings can you? Many people try to save ten percentages of their monthly earning. Be it a futuristic approach to life, a pension fund or the target to buy a house someday, we all need to save money. And here are some of the basic yet unarguable reasons for starting to save today.

 Payday Loan

Payday Loan

  • Saving money for the tough times

Unforeseen expenses creep up to us any moment and leave us mesmerized by the damage they do to our lives and financial status. You never know why and what problem will catch up to you in future, or even it will be there or not. But saving money is one irrefutable argument towards making your life secured from the unpredictability. You won’t have to dig in your emergency saving to fix your broken car or busted kitchen sink.

  • Saving for education

 

Be it for yourself or your kid’s future, education is costly. The loans put a person in to debt for the majority of their starting career, to ease up the trouble this could be a great getaway for you or your kid from the burden of paying outrageous loan amount. Your saving could cut up a serious percentage of education loans you may need to borrow, thus saving you a lot of interest to pay in the long run.

 

  • Saving for retirement

The sooner you start saving the better, because being fail safe for your retirement could make the difference from you being in a cheap old age home or a special care place for the time when you need it. Or it could be for taking the long awaited vacations to the destinations you were waiting to see all your life. Contributing towards your retirement will ensure you don’t have to stay dependent on someone else’s income or favor to live up the rest of your life. Match up the percentage your employer is paying and you will have saved up to 15% of your gross income per month.

  • Saving for property

 

Sure you don’t want to stay in the two bedroom apartment your whole life? Looking up to the same narrow street every morning when going to work? Or driving the same tin can to work every morning? Saving up for property with a particular goal in mind is important; it will help you see your dreams come true. Maybe not now, but someday when you finally get to buy the old fiat you always dreamt of, you will realize what the fuss was about saving 10% of your salary and giving up so much luxury for such a long time. Only then can you decide your work paid off or not.

 

  • Saving for down payment on a house

 

You can negotiate for a loan or a house a lot better when you have the capability to put up a significant amount of loan. Because of the down payment, you will receive better interest rate and you might get the bigger home you wanted instead of settling for the second choice. Determine what amount you could save up to and what year you are planning to buy the house and start saving today, it will definitely give you the shot at a better future.

 

 

  • Saving for vacations and entertainment

 

This is simply to have fun. After you put on such long hours to save up for many things you may simply want to take a break, go out with your family for the new movie that came out. Or take a long vacation far away somewhere. It could be to buy your kid the much awaited play station she worked up all night for studying and scored good on her report cards. This is purely on you, how you want what you want when you want it. Even if you have to skip out on the vacation, you will still have the money in your hand that you could use for literally anything. Extra money never hurt anyone did it?

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