Considering the Application Process for Payday Loans

Payday loans are a means for borrowing between £100.00 and £500.00 typically and the application process in the vast majority of cases takes place online. This means that lenders will assess the suitability of the loan in the most part by electronic means. Generally speaking it is the attention of payday loans lenders to deliver a service which is flexible, discreet and timely, with most lenders being able to make a lending decision the same working day the application is submitted. It is important to realise that lenders will not place speed as the uppermost important factor and therefore will not progress an application simply based on this. Instead modern day payday loans lenders will focus their efforts on making sensible and affordable lending decisions for their customers. Let’s look at the process of applying for payday loans, in greater detail, to understand then exactly how this generally achieved.

Payday loans as mentioned above are accessible via the means of an online based application process. To apply for a loan a lender will offer an online based application form which can be completed usually in little longer than 10 minutes. Typically speaking the application form itself will be broken down into a number of clear and logical steps, designed to gather all the key information regarding the applicant to make an informed lending decision. These sections usually focus around personal information, employment details and banking information. By gathering this information it allows the lender to run a series of automated checks to assess whether the requested loan can be deemed as suitable. These automated checks are completed via the means of what is commonly known as a ‘decision engine’. A decision engine assesses the identity, address, banking information and credit worthiness of an applicant. It will seek to verify the personal information of the applicant and then assess the credit worthiness against the individual payday loans lenders individual criteria. If at this stage any of the lenders requirements are not met, there is a high probability that the application will be declined.

Application Process for Payday Loans

Application Process for Payday Loans

In most cases once the decision engine has completed its checks and in essence the application has been provisionally accepted by the lender. At this point the lender will likely manually review the application to ensure all the information contained is as they would require. At this stage there may be a requirement for the applicant to provide additional documentation to support the application. Additional documentation is usually requested when an automated check has highlighted a need to verify some of the information relating to either identity, address or even employment. In some cases there will not be a need to provide any form of documentation in order for the payday loans lender to make their decision. Providing the lender is satisfied all of their electronic and manual checks have been successfully passed, it is at this point that the lender will have the ability to approve the loan and transfer the funds, usually via faster payment, to the account nominated in the application.

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Direct Payday Lenders and How to Apply

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.

Apply Direct Payday Lenders UK

Apply Direct Payday Lenders UK

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.

Payday UK

Payday Lending has become an integral part of today’s financially unstable society and the reason why it is regarded to be unstable is because, in previous years, the volatility of the financial world was being witnessed only by mainstream banks and financial institutions but after the 2008 crisis, it has trickled down to every single individual. Payday Lending came into existence in the 1990’s but was then, not as popular as it is today and their popularity just keeps rising. This is mainly because a majority of people are strapped for cash and are finding it difficult to meet ends to ends. A lot of these people also don’t have access to long term loans and as a result, have no way to meet their expenses on a regular basis.

The question that one needs to ask is whether payday lenders like Payday UK, Wonga and the major players in this industry have made it easier for people or have they added to the ever-existing financial debt? Are people benefitting from these services or are these companies an extension of the large multinational banks whose sole agenda is to create an illusion of wealth.

Let us discuss the origins of Payday Lending:

There was a landmark judgement made in a 1978 court case, where banks were given the go ahead to decide and charge interest rates on the basis of where the banks were physically located irrespective of the borrower’s location. For example, there could be a certain law which resisted huge interest rates in one particular state, but a bank could be functioning out of a state with a less strict law, servicing people in the high-interest state. This implied that you could service anyone living in any state and saw the rise of credit card companies.

The second judgement was a part of the Monetary Control Act, which stated that financial institutions could decide interest rates based on the market. This change in law saw a rise of payday loans, as now you could charge exorbitant interest rates to the borrower and attribute it to the market rate. This law gave these financial institutions a free hand to function and minimized the scope for regulation. Pay Day loans saw their first growth in the country of the US, but after a period of time, when the US started keeping a check on the economy in addition to the states having the authority to regulate their own interest rates, these payday lenders shifted to countries with lesser regulations such as the UK and thus was born the payday lending industry in the UK.

It has seen the rise of many major lenders like Payday UK, Wonga, and Lending Stream to name a few. These institutions have seen phenomenal growth in a span of a few years and most of these companies are still being controlled by US companies.

How has it impacted the borrower?

The motive behind setting up these institutions was to supply credit to people who didn’t have access to other forms of credit but their large interest rates, collection methods, misleading advertising has created a need to urgently regulate the functioning of this industry. They may claim to be making a positive change in people’s lives, but the state of economy has something else to show. It is unfair to just blame these institutions, as they were always in for making money at the cost of anything else; the borrower has also contributed to the importance of these institutions.

After the 2008 mortgage crisis, there were many who were left with absolutely no income to spare and were barely making it through. They were looking for an avenue for an additional source of income and payday loans provided that outlet. Although their initial purpose was to bridge the gap between the banks and the borrower by creating an alternative source of credit without giving too much importance to your credit worthiness, a move that was welcomed by the borrower, this has led to one of the major disasters that the financial world has seen. Borrower’s looked at these loans as a blessing and didn’t understand the complexity of these loans. APR was one such interest rate that was slowly but steadily eating into their income and the longer the duration of the loan, the higher the interest rate.

Borrowers were not interested in finding out the penalties involved with the non-repayment of the loans and were clearly not educated enough on the disadvantages that these type of loans carry. This was a failure on the part of the borrower, which was cashed in on by the lender who placed his entire advertising campaign centering on how they could get you of their financial trouble. What it read between the lines, was how they were going to get you out of the trouble you were in, to put into a bigger pool of trouble.  Their high APR, penalty fees, no limits on the amount of times you could roll over a loan, pathetic collection methods  were all various arms of this body of lies, these institutions had created.

Payday Loans might be here to stay, as there are many experts who feel that regulation will place an even bigger burden on the borrower, as these lenders will try to convert their loss of revenue into profit, by introducing more appealing schemes in the form of short term loans for mortgage (which some payday lenders are already offering) which could see an even further crisis.

The way out of this is not elimination and certainly not just regulation. The borrower needs to be guided in a manner which could benefit his financial position and at the same time, a borrower needs to be informed and keep up-to-date with the developments of the industry, so that he can make a more intelligent choice while applying for these loans. There are alternatives to payday loans and these should be considered at length, before jumping into these loans, just because of their easy accessibility.

 

 

Introduction to Pay Day Loans

Pay Day Loans are essentially cash advances that are offered to people in immediate need of cash. These loans have known to be more inclusive than long term loans, as they are reaching out to a much larger customer base, including people who cannot afford long term lines of credit. These cash advances are usually meant for people in times of crisis or in times of emergencies, where the need for fast and easy cash is needed. The advantage that these long term loans enjoy is their policy of approval irrespective of the credit history of an individual. This is the main reason for their popularity.

Need-to-knows about Pay Day Loans:

Although payday UK loans might tend to look attractive considering the wide product range they offer and the amount they are offering these loans for, one needs to be very careful while choosing these options. Let us discuss some of their features, to enable you to make an informed choice while doing so.

  • High Cost and Short Term: Access to these loans is relatively easy, as some people are using these services even on their mobiles, however these very features makes payday UK loans dangerous in the long run. Their easy access should be restricted, so that we realize that these loans are to be used only for emergency purposes and not as a substitute for your income.
  • The Role of APR’s: Many industry experts have argued that displaying APR’s can become quite meaningless, as the amount that you might end up paying as APR can be quite in contrast to what has been displayed. Displaying the APR is a legal requirement. Since these loans are borrowed on a short term basis, the rate of interest/fees can be quite high.
  • Ability to Repay: It is extremely important to know that if you are not in a position to repay a loan, you cannot afford the loan. This is not to be treated as an additional source of income and since these loans look appealing, it becomes all the more important to understand whether you will be in a position to repay them in the future.
  • Roll over Position: Although the roll over option might seem easy, more often than not, if you roll over a loan, the penalty charges and the fees these lenders charge, is much higher than conventional fees and tend to accumulate over a period of time which can sometimes land people into a huge financial crisis.
  • Credit Rating: It is a common notion that repaying a payday UK loan can improve your overall credit rating. This is not the case. Pay day loans have separate criteria when it comes to credit rating agencies, it has been found that although it may marginally improve your credit rating, while you’re applying for a mortgage loan, and it does not make a large difference.
  • No Credit Checks: Although pay day lenders advertise no credit checks, this may serve as more of a disadvantage rather than an advantage. This means that a lender does think it is important enough to check your capacity to repay a loan, which means that it is not in a position to guide you to manage your finances in a responsible manner. This also implies that if you are applying for another lender, he too is not in a position to judge your lending capacity.

It is a well- known fact that when credit checks are made, almost 60-70 % applicants are turned down in the process.

Future of payday UK loans:

Almost a decade after pay day loans have been introduced in the UK, there has been considerable debate over the future of these loans. They were a popular option post the 2008 crisis, as the cash-strapped economy found the offers to be far more attractive, since most of the financial institutions have restricted their lending capacities. There have been several people lobbying for stricter regulations on pay day loans UK, as surveys have indicated that about 2 million Brits were using these loans for meeting day to day expenses rather than emergency purposes. Following these not so positive developments, certain regulations have been put into place in early 2014.

  • The first and foremost step is completely transparency in advertising which includes all the risks mentioned.
  • Roll over limit reduced to 2.
  • A freeze on interest and other charges where the debt has been extended more than twice.
  • Continuous payment authorities have faced strict criticism as it enables these lending agencies to debit money from the borrower’s bank account without any warning.

What it means for the Lenders:

The proposal of these regulations and the following cap on the interest rates has seen many lenders leaving the market. Some highly profitable lenders like Wonga and payday UK have resorted to more transparency in their process, and have introduced rigorous checks in their application processes. There is a need for the lenders to be more customer-friendly and companies like Pay Day Uk have adopted measures which have led to responsible lending. Let us discuss some of the changes they have made in the process.

  • No lending to students or minors.
  • Doing a thorough check of the applicants to see if they are in a position to repay their loans.
  • People with debt problems are a strict NO.
  • No dealing with people whose identity is questionable.

Overall View:

Companies like payday UK have been responsible in their lending policies and have ensured that customers are fully aware of the limitations and risks involved with pay day loans. Their application procedures have also become more stringent ensuring that the applicants are in a position to repay the loans within the stipulated period of time, preventing any defaulting on their part and in turn maintaining a certain amount of credibility. This builds confidence in the minds of the customer, as he feels that the lending agency is more interested in guiding them rather than taking advantage of their poor financial conditions.