Payday loans, for those of you that aren’t aware, are small, unsecured short term loans that tend to have very high interest rates – much higher than any other type of line available to the public. Typically, these loans have a fast application process, are fast to be approved and have a high approval rate, and because of these features they are often used for financial emergencies. The concept that payday loans is built on is that a person is supposed to take out a payday loan to pay for a small necessity that they aren’t quite available to cover. Then, on their next payday, they pay back the loan to minimise the amount of interest they collect on top of the amount that they owe. However, this is not always how things work.Because payday loans are more readily available than other types, a lot of people apply for them simply when they want an extra bit of spending money and as a result they find it difficult to pay the loans back in addition to the interest. It used to be that as time went on, people’s payday loans just got bigger and bigger and it often reached a point where it was absolutely impossible to pay back the loan. However, there have been a lot of positive developments that have tried to change this.Earlier this year, the Financial Conduct Authority in the UK called for a crackdown on Payday loans and so implemented a cap on the total cost of credit for those that apply for payday loans. Now, the cost of credit can’t reach any more than double the original loan amount, which saves a lot of people from being stuck in a debt spiral with interest on their loans continuing to pile on.In more recent news, even more rules have been placed on payday loan lenders that everyone expects will change the game. The Competition and Markets Authority – also in the UK – enforced a new rule requiring payday loan firms to advertise on at least one loan comparison sight and to have the link to this comparison sight displayed prominently on their website’s home page. This new rule is designed to help people apply for payday loans to find better deals.One of the biggest problems with the payday loan industry at the moment is that there are so many of them and they are all competing against each other. This means that it can be quite difficult to find the best lender with the best deal when you have to wade through hundreds of different websites and all of the terms and conditions. That’s why many people tend to go with their gut when choosing a payday loan, and this doesn’t always work out in their favour. However, with lenders advertising on comparison websites, people have a means of finding out exactly what’s out there, which gives them access to the best loans and gives payday loans the incentive to make their prices more competitive.It seems that the payday loan industry has been moving towards increased levels of transparency in the last year or so and already there have been some great improvements. Now, most payday lenders include an
online loans interest calculator on their website to show their customers how much they might be paying back as a result of the interest rate on the loan they are applying for. Many lenders are also increasing the amount of information available on their website and directing customers in need to more stable solutions to their financial problems. Overall, it seems that applying for payday loans is becoming a lot safer for customers and they can apply for a loan feeling informed and certain about their decision.
