The Payday Loan/Short Term Loan Market
QuidMarket Short Term Loans Blog looks at how the loan market has changed since the introduction of the FCA regulation in 2015. It looks at the new polling of consumers of short-term credit and on industry data. We seek to understand how changes in the short term loan market have affected consumers. In terms of both costs of short term loans/payday loans and access to short term loans/payday loans.
The survey carried out by CFA showed the following:
- Industry data of the short term loan market shows that the average daily costs of loans have fallen significantly. They have fallen from 1.3% in 2013 to 0.7% in 2016. On average, consumers now are paying less for a loan than in the past.
- Data shows that the proportion of loans on which consumers were charged additional fees (beyond contractual interest) halved from 16% in 2013 to 8% in 2016.
- The poll carried out by YouGov shows that short-term credit often fulfills an important role for borrowers.
- The survey suggests an improvement in perceptions of affordability among more recent borrowers. 56% of consumers who took out a loan since 2015 agreed that their most recent loan was ‘an affordable way of borrowing’. This compared to 43% of those whose last loan was taken out before 2015.
- The survey also revealed that a large proportion (nine in ten) of recent consumers considered using short-term credit. This was because it was a convenient way to borrow money.
14% of the consumers in the survey, agreed that a short-term loan was cheaper than they used to be
- It also suggests that consumers perceive that the short-term loan/ payday loan credit market has become harder to access. More than half (57%) of consumers who had bought loans both before and after the price cap.
- Of consumers in the survey who had bought a loan before 2015, but not afterwards 16% tried to get a loan but were not accepted, and 18% thought they would not qualify for credit so chose not to apply.
- 6% of short-term credit consumers report that they would have used an unlicensed lender who is not a family or friend if they had not been able to access a payday loan/ short-term loan.
- The YouGov poll found that more males between the age of 18 to 34 had seen an increase in loan applications.
How to Evaluate Loans and Lenders
Lending markets are plethora of borrowing options, meeting the needs of many people from different professional walks of like. From short-term loans the alternative to payday loans there is something for all loan purpose. In fact, there are so many financial products to choose from, sorting through finance options can leave you with questions about the borrowing process.
What is short term/payday? Do I need a guarantor? Is revolving credit the same thing as a variable rate loan? Addressing these and other related concerns is a natural part of personal finance, helping you make the best possible borrowing decisions.
Essential personal finance understanding includes knowledge about interest rates, loan terms, credit references, and other important aspects of the lending industry. With the basics on board prepare to Google the lending markets and find the best loan for your unique circumstances.
Understanding Common Types of Loans and Credit
The design of most loans is to target a specific function. Mortgages for a loan for houses and other types of property. Mortgages, for instance, extend for decades, so interest rates are relatively low.
A car loans are reserved exclusively for transactions involving transport. The terms of each type of loan reflect its purpose. Since car loans move sales forward, and because the industry is highly competitive, a number of dealers will offer a zero per cent to get you in the door.
Credit cards represent typical revolving credit arrangements, extending purchase power for a fee. Depending upon the terms of your card holder agreement, credit card accounts commonly allow charges to be made during a month long billing cycle, which come due after a grace period. The flexible convenience of “plastic” has become the point of purchase standard.
Alternative financing includes short term loans/payday loans and other types of funding for good and bad credit applicants. These are normally used by people with a bad credit history and cannot secure a loan from their bank, or by people who need the cash the same day for car repair or other emergency expenses.
Online resources such as Google, Compare the Market, Choose Wisely and other online sites, make it easier than ever to compare credit opportunities. Readies and other sites maintain timely listings, featuring current rates and terms. These resources enable site visitors to compare various funding alternatives side by side. Furnishing testimonials and other information about loan providers.
You should evaluate each individual borrowing opportunity according to your personal priorities. Your loan conditions should also hold up to objective standards. If there is anything about a lender that doesn’t measure up, pursue other avenues. Top lenders are:
- Highly Rated
- Service oriented
- FCA compliant
Comfortable answering all you questions
In addition to consumer information shared by lenders, various financial charities provide guidance and assistance managing money. Such as the following:
- Stepchangeoffer advice, support and solutions to help you manage your debt
- National Debtlineprovide advice through their online portal and have multiple fact sheets/sample letters
- Citizens Advice Bureaucan help you with face to face advice if you are in serious financial difficulty
- Money Advice Serviceoffer free and impartial advice
These impartial agencies offer encouragement and actionable advice for citizens in need. If you’ve explored independent resources, yet still have questions, charities offer helpful information about the lending process.