Short-term loans have a lead time of at least 10 days to 6 months, or years or more. A payday loan is a special type of short-term loan that has a short duration and usually waits until he/she gets paid. They are usually up to £500 in loans and can be repaid before the next loan. Payday ''. Typically, a 100-pound loan will cost 25 pounds per month. The annual interest rate [APR] of such loans can reach 1000% or higher! APR represents the cost of this loan on an annual basis, rather than the actual monthly fee. The actual annual interest rate is a standard for disclosing borrowing costs, making it easier for cross-lenders to compare. Again, this disclosure is intended to protect consumers.
There is no limit to the interest that the lender can charge. Payday loans are very popular in the UK. Customers typically lend six such loans each year, between £100 and £1,000, with an annual interest rate of over 5,000%. Today's payday loan industry is worth about 2.8 billion pounds. As a result, the UK's financial regulator, the Financial Conduct Authority [FCA], has developed new rules for the industry to protect the interests of borrowers.
Why do people have to pay a payday loan?
· Pay any unexpected expenses
· Pay for the repair of a house or car
· Cross the end of the month until the next payday
· Avoid borrowing money from friends and family
· Continue to execute the plan because they can't afford to cut costs
· In order to cope with unexpected huge expenses, such as huge car repair costs or roof collapse, emergency repair must be made
· Cope with some medical emergencies or hospitalizations
·If a family member dies to pay for financial expenses
· In any other emergency, funds need to be provided immediately, but the public cannot use it.
What does a payday loan lender offer?
· The flexibility of repayment, because the loan can be renewed without repayment
· Easy to apply and pay for loans – 24 hours turnaround time
· Bypassing traditional credit checks
What if you don't pay back on time?
You can choose to pay in installments to delay payment. It depends on the number of flips. Or, through a continuous payment institution, the lender can automatically withdraw the loan and interest amounts directly from your bank account.
New rules for payday lenders:
· The lender will be forced to conduct a more rigorous affordability check. As we all know, the FCA's municipal regulators can crack down on lenders at any time and prevent lenders from providing loans. The lender must register at the Fair Trading Office
· Designed new rules to protect borrowers so that only those who have the ability to repay the loan can get it
· Large lenders are condemned for charging high interest rates
· APR must be clearly communicated to the borrower
· FCA took over all payday loan provisions in April 2014 and implemented restrictions since July 2015
· Allow up to two transitions.
· The status of the priority creditor has been removed.
· They will provide free debt advice to borrowers who must carry over the loan.
· The government should compare different lenders according to the interests of consumers.
What better option than a payday loan?
A 0% credit card is a better choice than a payday loan for the following reasons:
· No need to pay large interest
· Flexible repayment schedule
· Suitable for long-term loans