There are a number of different type of lenders who operate within the online market for short term borrowing. Many of us will be aware of this fact but equally a vast number of borrowers, particularly those new to the market, will not yet be aware of this fact. To provide a summary of the market in general, short term loans are loans which primarily exist online and provide a service for borrowing a small sum of money over a short period of payment; which is pre-agreed at the point of being approved. These loans are technically defined as ‘Short Term, High Cost’ credit because of the costs associated with the agreements. Unlike more long-standing resource which are better established (in terms of longevity) like a bank loan or credit card provider, these online loans aim to deliver a relatively much smaller resource for borrowing. Typically speaking these loans vary in size from £50.00 up to £500.00 and therefore are considerably smaller in value compared to that of a bank based lending choice which could exceed the tens of thousands. Due to the small value of the loans being offered, lenders offer repayment period to match meaning usually the total term is no more than 12 months and can be as little as 2 or 3 months. Understanding the options offered in terms of lending resources is important but so is understanding the different term of lenders we have to choose from.
Within the online short term borrowing market we will be presented with two very specific types of lenders. There are the direct payday lenders and also the brokers. Both of these lenders will usually ‘appear’ to offer the same service; a small loan repayable over a pre-agreed short period of repayment however there are in fact notable differences. Direct payday lenders are the lenders who generally speaking are the preferred choice and this is down to one very simple factor. This factor is that fact that direct payday lenders offer a direct service for the product that particular lender is offering. This means, as the name suggests, that the service is direct and therefore does not involve the passing of your details to another lender (generally speaking). As such we can expect to complete the entire application, from start to finish and have a lending decision delivered by our chosen lender. In the instance of brokers the service is actually quite different to that of direct payday lenders. A broker will not require an ‘entire’ application to be completed in the respect that they will not require all of the usual information you would expect, in order for them to make a decision as to whether they can offer you their service. This is because brokers in actual fact offer a service to suggest a potential lender and in the vast majority of cases, do not actually offer loans to customers directly. Given this fact more often than not, brokers cannot guarantee that their suggestion can in fact grant a loan and in the process will charge a fee for the service they offer.
There can always be times when people need money and this can be down to so many different reasons. There can be some people for example who could need a large amount of cash as they are looking to make some form of expensive purchase. This could possibly be a new car perhaps or maybe someone is looking to spend money on a new house etc. Other people may only need a small amount of money to possibly just tide their finances over until the next time they are paid from their employer or they could just need to pay some form of bill etc. Now regardless of what anyone ever needs the money for, if they have this saved they can use this as required to pay for whatever they need. Some people may even have enough saved to pay for their requirement outright or they will just put some money towards what they need. If it is not possible to turn to savings then the chances are people will then have to look at borrowing the money. Below is information in what direct lenders can offer to some borrowers.
Direct Payday Lenders Offers
When it does come time for someone to borrow money they may not realise just what options can be provided by direct payday lenders. It is now safe to say that the process of people only borrowing from their local bank and the branch manager has now well and truly gone. People can often have a number of different options. If a loan is required then perhaps a short term loan could then be available. These can normally offer borrowers the chance to take out finance for amounts ranging usually between £100.00 and £500.00 but sometimes more. That person may then repay that debt over a maximum time frame of up to twelve months. These loans from direct lenders are designed to help people over short term so in case of possible financial emergencies and never should these loans be used as a long term borrowing solution.
Another type of loan borrowing and more common would be instalment loans. These too are often provided by either financial brokers or direct payday lenders. It can be common that with this way of borrowing money people can take out higher loan amounts and they can then repay that debt back over a longer period of time. A common type of short term loan would be a payday loan, which when borrowed will then be due to get repaid with high interest just as soon as the borrower is paid again from work. These loans in particular are often seen as a very expensive short term loan. On the other hand a common type of instalment loan could actually be a mortgage. So many people from all over the world have one of these. People with this type of borrowing money can usually obtain a higher amount than a short term loan and then as a result they can pay the debt back over a longer period of time to try to make the finance more affordable for the individual.
The process of applying for a loan from direct payday lenders is more straight forward and streamlined then ever before nowadays. This does not mean it is ‘easier’ to obtain such a loan but instead means the application process is simple and easy to understand. This is particularly the case now that the vast majority of lenders offer mobile optimised applications, meaning the application form can be completed in an equally timely manner to that of an application completed on a laptop or tablet. The introduction of mobile optimised application forms mean that nowadays this is often the preferred method of application. Like some many of our social and personal requirements, our Smart Phones are usually our first point of call given their ability to connect us to the internet as and when we need them too. As the application process of applying for a loan via direct payday lenders has evolved over the years, the need for verbal contact has generally speaking reduced. This means for many consumers the application process can be completed from start to finish without the need to necessarily speak to the company with whom the application is being submitted. This means direct payday lenders have advanced their decision engines and internal systems to ensure electronic based checks can help ensure the process of application runs smoothly and is completed in a timely manner.
The recent changes to the regulatory body responsible for the short term borrowing market means that direct payday lenders are better controlled and monitored than has ever been so before. The Financial Conduct Authority (FCA) now have control over direct payday lenders in that they are responsible for providing rules and regulations concerning how the market can conduct its activities to ensure consumers using the market are treated fairly. As a result of this fact lenders within this market are making considerable efforts to ensure the process of approval is considered and evidence based. Generally speaking lenders will achieve this through a range of both electronic and manual checks, completed after the point of completion of the application by the potential customer. Whereas in the past lenders may have only been interested in very specific lending criteria, relating commonly to the validation of identity, address, bank account information and perhaps employment, today this is no longer the case. Direct payday lenders now also use a number of other more advanced checks to assess whether the requested loan is truly and realistically affordable to the individual. Again, this will often be achieved by the completion of both electronical checks of the applicant’s credit worthiness, with manual input from experienced Underwriters where applicable.
The great news for consumers is that all of these checks, regardless of depth are also designed to take place in a controlled and streamlined manner; meaning the application process can still be deemed as ‘quick’ and in line with the fundamentals of the product being requested. Typically speaking applying for a loan via direct payday lenders will result in a lending decision the same working day.
When it ever comes to borrow money, a high number of different people may not actually know that there are a number of different ways to do this. That is just one of the so many different reasons why people should never ever rush into applying for just the first piece of available finance that may come along their way. People for example can often take out both short term loans and instalment loans in the obvious loan borrowing format. People here can often borrow a range of different loan amounts for repayments then due back over a number of different repayment terms. Another common way to borrow money would be via the use of credit cards, these of course allow people the chance to pay for different items as well as withdraw cash on credit up to set limit via the actual card itself. All three of these finance types are very common ways to borrow money. In the article below I am now going to focus my attention to short term loan borrowing and I will explain more about in particular payday loans and how these can work out to be expensive.
Payday Loans Can Often be Expensive
Pay day loans are a very common way for people borrow money, they are one of the most common types of short term loans in the financial market place. This marketing place has grown in recent years as it has seemed that more and more people turn to this way of borrowing money when they need cash quickly for a limited period of time. These loans themselves can often turn out to be very expensive and pay day loans are certainly no exception. People often borrow these for a maximum period of a single month and then repay the debt in full just as soon as they are paid from their work. It can be common that most lenders that offer such a product will charge around 25% or over per £100.00 borrowed by any customer. If someone was to therefore borrow £300.00, people would have to repay around £375.00 to clear that loan in full. That will be expensive interest considering how little time people repay the debt over.
A strong benefit of payday loans however, will be the speed in which people can receive their money once their financial application has been accepted by the lender. I always feel that when people need money the chances are they will want this quickly. People often want the money at their disposal quickly so they can use it as required for whatever they need the cash for. People can often apply for pay day loans online or over the phone in a process that should only take a matter of minutes to complete. If that application is then accepted the lender can look to fund that person the very same of their application getting completed. There can also be some cases when lenders can fund the borrower within just minutes of them approving their loan.