Here we share some tips for consumers thinking about taking out a payday loan. It is really important as a first step to think carefully about whether you need a loan at all, and, if so, is a short term loan the best choice for your needs at this time? There may be other, cheaper, options available as alternatives to payday loans.
If you have decided that you only need a small sum of money for a short term, possibly to cover emergency expenses that you hadn’t planned for or expected, then there are many online payday loans lenders and payday loans brokers.
Payday loans brokers are introducers and will pass your application to a Payday Loan Lender. These introducers do not fund loans themselves.
Payday loans lenders make the underwriting decisions themselves (that’s the checks and decision making on whether to make the loan) and fund the loans themselves.
Before you make a choice of online Payday Loan Provider lender, you should check that the website has the following:
A consumer credit licence number, which can be followed up on the OFT’s online consumer credit licensing register site, which is publicly available and free to access
A name, and an indication of the company or business name if this is different to the trading name – its important to know who you are dealing with.
An address, which should correspond with one of the addresses on the consumer credit licence
Clear contact details such as a telephone number and/or email addresses. Think how important it may be for you to be able to contact the provider by telephone
It is not a mandatory requirement to be a member of a trade association, but this may give you extra comfort that the lender advertising meets certain codes of practice
A link to the Good Practice Customer Charter. Some lenders that do not belong to trade associations may feel they do not need to display this link, but it is not trade association specific. The Charter gives payday loans consumers additional reassurance that the lender meets certain standards
If the lender is giving any information about the cost of a payday loan (for example by a chart, or a slider, or a table) then they should also show a representative APR and a representative example, which gives cost information for a typical loan size and type as an illustration.
The website should provide a balanced picture of the risks and benefits of using payday loans. For example:
You should be able to find examples of default charges, if any are applied.
If there is a faster payment charge, or same day funds transfer charge, this should be outlined on the website, together with information on how this charge is applied, for example by deducting it from the loan amount received by the customer.
There should be an explanation of how missed payments may affect credit history, or access to credit in the future.
Equally, there should be information on how making payments on time could have a positive effect on credit rating, if this is the case.
The Good Practice Customer Charter requires lenders’ websites to provide a “wealth warning” – that payday loans are unsuitable as a means of longer term borrowing and not suitable for people in financial difficulties
Details of not-for-profit (usually free to access) debt counselling organisations should be available
You may find a comprehensive FAQs section and a detailed complaints page handy, too.
Bio: Sophie used Uncle Buck to locate the best possible payday loan deal, she wrote this article to share the information she learned along her way when looking for a loan herself, if you have any questions, you can comment below.
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