Tag Archives: payday loan

How Has The UK Short Term Credit Market Been Revolutionised by The 2015 FCA Price Cap Regulation?

How Has The UK Short Term Credit Market Been Revolutionised by The 2015 FCA Price Cap Regulation?

Since the FCA introduced price cap regulation back in 2015, there have been changes in the short-term credit market.

The latest Social Market Foundation (SMF) report commissioned by the CFA (Consumer Finance Association) offers the latest assessment on the impact of price cap regulation on the short-term credit market in the UK with a special focus on cost as well as access to loans. The report contains information gathered from industry data as well as short-term credit consumers in the UK.

Considering 6.8 million UK households still live below the poverty line, a significant number of UK households rely on credit. Changing employment and work patterns as well as state benefit changes have also resulted in income instability which has, in turn, increased dependence on credit. Rising inflation and housing costs have also increased the need for short-term credit in the UK.

Let’s not forget the poor saving habits in the UK. A previous SMF research study shows that 40% of UK citizens have less than a week’s worth of income as savings. With this in mind, the health of the UK short-term credit market can’t be overlooked since most people with financial difficulties turn to short-term loans. Considering the FCA price cap regulation is the latest and most significant UK credit market event, how is the market now?

What has changed?

1. Cost of loans

According to the latest SMF report commissioned by the CFA and produced independently by the SMF, the cost of loans has fallen significantly. The latest industry data shows that the cost of loans has reduced by from 1.3% (in 2013) to 0.7% currently. In a nutshell, loans cost less now. It gets better! Loans are cheaper than the 0.8% initial cost cap set by the FCA which is an indication of healthy competition in the industry.

2. Default fees

Industry data also shows that default fees have fallen. The proportion of short-term loan on which borrowers pay additional over and above contractual interest has halved from 16% back in 2013 to 8% currently. In cases where loans are subject to default fees, the total amount of fees including interest charged after default has dropped from £45 to £24. However, concerns linger on whether the fees are still high considering they represent approximately 10% of the value of most short-term loans taken in the UK.

3. Borrower perceptions and experiences

According to the latest SMF survey, consumer perceptions have improved on affordability. Consumers are of the notion that short-term loans have become affordable. 56% of recent borrowers agree that short term loans have become more affordable. Only 43% of borrowers who took out short term loans before 2015 believed they were affordable. Although there are consumers who insist that loans haven’t become affordable, a majority of such opinions can be attributed to the fact that some borrowers assess affordability based on their own ability to service loans.

In regards to experience, most people (90%) feel short term loans are the most convenient source of short-term credit today. Some concerns have however been expressed on repayment. Approximately 20% of all recent borrowers today state that they have problems repaying short-term loans as planned or in time.

4. The size of the short-term credit market (Number of loans sold)

The latest industry data shows that the number of loans sold decreased significantly over the January 2016 to April 2016 period. The loans taken during this time were 42% lower compared to the same period in 2013. Industry experts attribute the fall to a decreasing number of lenders during this period. Many short term loan lenders exited the market between January and April 2016 after finding it extremely difficult to operate in the confines of the new price cap regulation.

5. Access to loans

The FCA had predicted that the regulation would exclude some consumers from the short term credit market more so, lower income individuals. This prediction is consistent with industry figures. The SMF report suggests that access has become restricted. An SMF survey shows that consumers are of the notion that it has become harder to obtain loans. 57% of all consumers who have taken loans before and after the regulation changes state that short term loans have become more difficult to access.

The SMF survey, however, shows that only 16% of people who have tried accessing loans before the regulation, not afterwards, have been denied loans. This is against 18% who haven’t bothered to take loans after the new regulation just because they thought they wouldn’t qualify.

Many consumers still find access to loans important for essentials or avoiding other borrowing channels such as borrowing from family members and friends. According to the SMF survey, 27% of consumers risk going without essentials if they don’t get access to short-term loans. The survey also reveals that 37% of consumers are forced to pursue other credit channels such as borrowing from family and friends if they don’t access credit despite this option being the least reliable and suitable for many.

The rest are forced to cut back on spending, misappropriate funds or rely on alternative or mainstream credit which comes at a higher cost. Some customers also resort to borrowing from unlicensed lenders when they fail to secure funding from licensed short-term credit lenders.

Summary

In a nutshell, the new regulation may have reduced the cost of loans and default fees as well as improved consumer perceptions, however, access to credit has shrunk, and the hardest hit borrowers are low-income individuals. Although the regulation stops exploitation by lenders, which was a huge problem especially in the payday loan industry, some borrowers are being forced into the hands of unlicensed lenders. This is contrary to the FCA’s previous conclusion that the new regulation would be a good thing to low-income borrowers.

The price cap appears to have reduced unscrupulous lending practices among licensed lenders, but there is an increasing number of borrowers turning to unlicensed lenders giving rise to worse problems. Unscrupulous (unlicensed) lenders don’t have to work as hard as before to attract borrowers since access to short-term credit has shrunk among the lower income borrowers. Short term credit lenders in the UK have stricter affordability assessments today which have reduced the number of loans being offered to individuals who are deemed high risk.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
Is Your Payday Loan Provider Legal?

Is Your Payday Loan Provider Legal?

Getting a loan from traditional lenders like banks is not easy. This is one of the main reasons people prefer payday loans. Banks require collateral. You also need a good credit score. If you don’t have collateral and a good credit score, you need a guarantor to co-sign the loan agreement. Considering guarantors are hard to come by, it’s understandable why many people turn to payday loans today.

You don’t need security or a good credit score to secure a payday loan. It also takes less time and effort to get a payday loan. You can apply for the loan online and receive the loan amount in a few minutes. The benefits of payday loans are obvious. However, not all payday lenders are good. So, how do you determine if you are working with an authorised lender?

Scarce lender information

Most illegal internet payday loan providers in the UK have one thing in common i.e. they offer scarce information about themselves online. If you can’t get concrete information about a lender on their site, be cautious. All online UK payday loan providers must adhere to the same rules followed by their storefront counterparts. It’s not advisable to deal with any company online, let alone a payday lender, that doesn’t offer adequate information online.

Online payday loan lenders are required by law to provide their Company number as well as their FCA authorisation number. Most unauthorised lenders don’t provide such information. In fact, recent statistics from European Union investigations indicate that only one out five online payday loan companies in the UK provide basic lender information as required by the law. Unauthorised lenders who are only interested in making quick money and exiting the market have no business following legal channels. The lenders make it impossible to check their authorisations or credentials.

No infrastructure investment

It’s also worth noting that illegal lenders have no interest investing in infrastructure. For this reason, most illegal payday loan lenders don’t have a working call-center, physical address/permanent office, and staff. In a nutshell, you can’t visit or get into contact with the company in person if you want. The lender may have contact details that don’t work. All online companies can be traced to a physical address or location because they are started by individuals. Illegal lenders are untraceable because they have very little to no infrastructure investment on purpose.

Missing APRs

You should also be wary of payday loan sites that don’t highlight the representative APRs. The representative APR is arguably the most important lender information in any payday loan website since it highlights how much a borrower is expected to pay in interest. Any lender who doesn’t disclose this information isn’t transparent and will most likely end up overcharging you.

Expired information

Payday lenders also need to have up-to-date information for them to be considered legal. It doesn’t matter if a lender has interim permission or is fully authorised. The lender you are dealing with must have updated information. You can conduct a quick search on the FCA’s website http://fca-consumer-credit-interim.force.com/CS_RegisterSearchPageNew to ascertain this.

Inaccurate information

The information presented on the FCA’s website must also match with the information presented on the lender’s website. Most fraudulent payday loan providers pose as legitimate lenders. It’s, therefore, important to ascertain if the payday loan provider you are dealing with is a registered lender or broker.

Summary

To secure a payday loan, you have to submit sensitive personal information (such as your name and bank account) to your lender. For this reason among many others, you can’t afford to deal with a fraudulent provider. Luckily, there are many signs to look out for when you want to identify fraudulent providers. One, most fraudulent payday loan providers offer scarce information on their website. If you can’t get adequate information about the payday loan provider, their terms and conditions, interest charges etc., think twice. You should also beware of payday loan providers who don’t have any infrastructure investment. The validity and accuracy of information is also important. Expired and/or inaccurate information is a sure sign of trouble. All in all, you must do your research and understand the risks of dealing with online payday lenders.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
What Are The Best And Worst Ways To Use A Loan?

What Are The Best And Worst Ways To Use A Loan?

It’s always advisable to live within your budget, stay away from debt, etc.. However, there are some cases when it’s justifiable to take on debt. Sometimes it’s inevitable to take debt. When you have an emergency expense for instance (such as an unexpected medical or car repair bill), you may be forced to take a payday loan or any other type of short-term loan. It’s a bad idea to take up a loan if you don’t really need one. With that said, let’s get into more detail on the best as well as the worst ways of using a loan.

Best ways of using a loan

1. Starting a business:

It’s highly recommendable to take a loan and start a business. Business loans make the most sense because they are put into one of the most productive loan uses. Provided you prepare a solid business, it’s always a great idea to use your loan to start a business.

2. Debt consolidation:

You can also take a loan to help you manage your debt better. Managing debt can be stressing when you have many loans. Debt consolidation allows you to clear off multiple debts so that you remain with one manageable loan. If your loans have gotten out of hand, it’s a good idea to consolidate as long as you still have the capacity to service the resulting debt.

3. To build your credit score:

You can also take a loan to build your credit score. If you have a bad credit score that needs to be improved fast, taking a loan is a good idea. The benefits of having a good credit score are enormous. As long as you can repay your loan in time, there is nothing wrong with building your credit score by taking loans and repaying them in time. This tip works perfectly with credit card loans/debt.

4. To cater for emergency expenses:

As mentioned above, you can take a loan to cater for emergency expenses. Medical bills, car repair bills, roof repair bills among other kinds of bills may arise when you don’t have money. In such cases, you can take a payday loan among other types of short term loans to cater for those emergencies.

Worst ways of using a loan

Let’s turn to what you shouldn’t do with loan money. Ideally, you shouldn’t take in debt to spend on unnecessary expenses. Although the definition of ”unnecessary” expenses can vary from one person to another, here’s what you need to know.

1. Never take a loan for gambling:

Gambling is very risky. The odds are usually against you. There is nothing wrong with gambling with your own money if you really want to gamble. However, it is not advisable to get into debt because of gambling. In fact, you should avoid taking loans to engage in any activities whose outcome can’t be controlled.

2. Funding luxuries:

You should also avoid loans if you are taking them to fund luxuries i.e. buy the latest furniture, electronics, go for a holiday, buy a second home, buy new clothes/shoes. Most people get into debt because of taking loans to enjoy lifestyles they can’t afford. To avoid this mistake, fund luxuries using your own money. You can take a loan if you already have the money to fund luxuries. For instance, you may be waiting to get paid. Unless you are in such a scenario, avoid debt by all means. If you can’t afford something at any given movement, save up and get it later. You should, however, consider putting your money into better use i.e. funding income generating ventures such as a business.

3. Paying everyday bills:

It’s also a bad idea to get into debt every month to pay rent, energy bills, grocery bills, etc. You can take a payday loan once in a while to sort out expenses when you have some financial difficulties. However, it’s not a good idea to pay for everyday bills with debt. If you find yourself doing this, it’s time to adjust your lifestyle to match your income. It is possible to avoid short-term loans by living within your means and building a savings account.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
Donald Trump Wants To Scrap The Consumer Protection Agency, What Does This Mean For Borrowers In The US?

Donald Trump Wants To Scrap The Consumer Protection Agency, What Does This Mean For Borrowers In The US?

US President Donald Trump is facing immense pressure to get rid of America’s consumer protection agency CFPB (Consumer Financial Protection Bureau). This is according to the man set to head the agency. If this happens, rogue debt collectors, loan sharks, and payday lenders will have unmatched freedom to rip off American borrowers.

According to Randy Neugebauer who is slated to replace the current CFPB Director, President Trump is facing immense pressure from the Republican Party to break up the agency completely. The former Texas congressman held talks with the then President-Elect Trump shortly after his election victory in November.

While speaking to The Independent exclusively in his 1st interview since the new Trump administration took office, Mr. Neugebauer stated that his meetings with President Trump have involved discussions revolving around deregulating as well as gutting the CFPB.
Mr. Neugebauer went ahead to state that some of his colleagues are in favour of doing away with the agency completely. He is however of the opinion that it’s better to change certain aspects of the agency as opposed to doing away with the agency completely. Mr. Neugebauer feels that the government shouldn’t be telling the public what types of financial products are the best but rather, creating a safe environment where the public is safe from unfair lending practices.

This is where the CFPB comes in. The agency has the power to take any necessary action against companies which break the law. The agency also takes on cases revolving around race or age discrimination.

Under Mr. Neugebauer’s watch, the agency’s current form is likely to be dismantled which may result in the agency losing much of its influence. Mr. Neugebauer claims that American consumers are currently being suffocated by regulations. He prefers a consumer environment where consumers have the freedom to choose the loans they want whether the deals available are good or bad.

Mr. Neugebauer has stated that he is willing run the agency if appointed. However, it will depend on what the long-term plan of the agency will be. Although Mr. Neugebauer admits to having had broad discussions with President Trump, he goes ahead to state that he hasn’t discussed any specific job offer with the president.

Mr. Neugebauer has been on the record voicing his support for payday loan lenders, despite the apparent lack of transparency as well as crippling interest rate charges that have contributed to calls for payday lenders to be banned.

He also backs President Trump’s executive order aimed at reviewing the 2010 Dodd-Frank financial regulations. Mr. Neugebauer states that the Obama administration rules meant to get rid of risky lending practices were an overreaction. Mr. Neugebauer views the current regulation as blanket regulation meant for the whole financial market yet some entities weren’t part of the cause of the financial crisis that warranted the 2010 Dodd-Frank financial regulations. In his opinion and those of many others, the regulation went too far.
Under the current CPFB director Richard Cordray, customers who have been victims of credit scams or unfair banking sector practices have received billions in compensation. However, Mr. Neugebauer claims that the problem was overstated and individual states were doing a better job when compared to the CPFB.

He admits to the fact that there are people who will always try to abuse the system, however, action can and has been taken against such people.
Furthermore, the CFPB is already under threat given the federal appeals court ruling in October that the agency has an unconstitutional structure. The ruling also gave President Trump the power to dismiss the current director at will and appoint his replacement anytime even before his term ends in 2018.

The agency which came into being after the 2010 Dodd-Frank reform law was enacted is among former President Obama’s main domestic policy achievements. The achievement is, however, unpopular with libertarians who think it has resulted in unplanned long-term commitments that shifts from the initial objective. Most libertarians feel the agency should either be reformed or disbanded.

A bill has already been introduced by Representative John Ratcliffe and Senator Ted Cruz to disband the agency. If the bill is passed prompting the disbandment of the CFPB, the move will be hugely controversial. Many banking sector players have warned against such a move claiming it will do more harm than good.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
Payday Loan Fraudster Used Tinder to Lure and Fleece Women of Thousands

Payday Loan Fraudster Used Tinder to Lure and Fleece Women of Thousands

30-year-old fraudster Jonathan Frame used Tinder, a popular dating application, to lure and fleece lonely women. The Swinton conman would meet lonely women, steal their identity and then run up debt in their names. He would use the stolen personal information to take out payday loans as well as apply for credit cards and overdrafts according to a Manchester Crown Court hearing.

Frame would go as far as rifle through the mail of his unsuspecting victims,  set up fake email accounts and even call up lenders on behalf of his victims to get credit cards activated. In such instances, he would lie that his girlfriend at the time was deaf.
Frame spent part of his proceeds on designer clothes and restaurant meals with his unsuspecting victims. He was also ”kind” enough to buy his victims expensive gifts with part of the money.

During his 1st February 2017 Crown Court sentencing, Frame pleaded for a suspended jail
sentence claiming he had an honest job at a high-end street store. His plea, however, fell on deaf ears as presiding Judge Michael Leeming ruled that community punishment wasn’t an option since fraud was what Frame did for a living.

Frame has been jailed for one and a half years. He admitted to fraudulent offences amounting to £6,990 against two women he met in 2014 on Tinder. During his sentencing, one of the women he fleeced told the Crown Court she had contemplated suicide because of Frame’s actions. The other woman confessed to being scared of dating in the future.
Frame fleeced his first victim £6,221 in a record seven weeks. The woman is liable for the debts accumulated under her name despite being unaware of what was going on. This is because she shared personal details with Frame. The woman fell for Frame’s charm as well as his persuasive nature. She confessed to thinking Frame loved her genuinely, so she trusted him and gave him access to her house and car. Frame used this access to intercept her post and facilitate the fraud.

According to the woman, Frame has ruined her life. She also feels betrayed and doesn’t expect to live debt-free until she turns 31 in 2022. She also expects to struggle securing
a mortgage given the debts she has accumulated. She was just 23 years old when she met Frame. Frame targeted his second victim shortly after fleecing his first victim. His second victim discovered Frame was a fraudster when he left one day for good. She was fleeced of £569 in 13 days.

This is not the first time Frame is finding himself on the wrong side of the law. Frame has been convicted for 21 offences previously mainly for fraud, theft, and far-dodging. The offences date back ten years. In his latest case, Frame’s barrister Paul Hodgkinson defended his client claiming he was genuinely interested in the relationships with his victims despite the impression that he was out to con lonely women. Hodgkinson went ahead and stated that Frame was apologetic for his actions and was only keen on impressing his partners. Judge Michael Leeming wasn’t convinced of Frame’s innocence resulting in an 18-month jail term for the payday loan fraudster.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
How payday loans differ in other countries: UK vs. U.S

How payday loans differ in other countries: UK vs. U.S

Payday loans are the most popular short term loans globally. The loans are available in all major economies globally. If you care to know how payday loans vary from one country to another (particularly the UK and U.S.,) look no further. Here’s what you need to know;

Payday loans in the UK

Although payday loans originated in the U.S., they have grown more rapidly in the UK. According to a recent PWC study, over 40% of all youth in the UK use payday loans. The UK payday loan industry is estimated to be worth billions of pounds today.

Typical UK payday loans range up to £500. Many UK payday loan lenders, however, offer flexible lending limits amounting to more than £1,000. Interest rates stand at approximately 25% per month for typical payday loans. There are however many lenders charging way less.

Largest Participants 

Wonga is the largest UK payday loan lender with approximately 30% market share. The second largest lender is Dollar Financial Group which owns the Money Shop as well as payday lenders; Payday UK, Ladder Loans, and Payday Express.

Regulation

The UK payday loan industry is regulated by the FCA (Financial Conduct Authority). The FCA took over the regulatory role from the FSA back in 2014 in an effort to exert tighter control on rogue payday loan lenders.
In January 2015, the FCA introduced strict regulations that guide the payday loan industry to date. For instance, payday loan lenders in the UK should not charge more than 0.8% interest per day. The total charges on all payday loans including interest and default charges are also capped at 100% of the total amount borrowed.

Status

The UK payday loans industry is currently transforming. The industry has had a bad name for years due to an increasing number of rogue lenders using unfair lending practices. The tightening regulation has however brought back sanity to the industry. The FCA has fined numerous payday loan lenders found guilty of using unfair lending practices. Although many lenders have closed shop, there is still a high demand for payday loans in the UK.

Payday loans in the U.S.

Payday loans originated from the U.S. They are also known as; cash advances, salary loans, payroll loans, cash advance loans, payday advance, etc. The loans date back to the 1900s where they were known as salary purchases. Initially, lenders would buy a borrower’s next salary for less and then disburse the difference to the borrower after deducting all applicable charges. Fast forward today, the industry has grown from 500 lenders to 22,000+ lenders. The U.S. payday loan industry is estimated to be worth over $46 billion today.

Regulation

Payday loan regulation in the U.S. varies widely from one state to another. To avoid unfair lending practices, many jurisdictions in the U.S. have APR (annual percentage rate) limits that all lenders must adhere to. It’s also worth noting that some jurisdictions in the U.S. have outlawed payday loans completely i.e. Georgia. In total, 14 states have forbidden payday lending. Other jurisdictions have few restrictions on lenders.

Some states also have laws limiting borrowers from taking payday loans repeatedly. Such states include Michigan, Illinois, Florida, Indiana and New Mexico just to mention a few. These states have statewide databases that require lenders to assess a customer’s eligibility to get a payday loan before issuing the loan. There is also regulation restricting the number of times a payday loan borrower can roll over their loan. Some states restrict rollovers i.e. Arizona. Other states i.e. Delaware allow a maximum of four rollovers.

Initially, payday loan rates were restricted in most U.S. states by the USLL (Uniform Small Loan Laws). The USLL restricted the rates at 36 to 40% APR.

Status

The U.S. payday loan industry caters for the young and poor mostly, low-income communities residing near military bases. A recent study conducted by Pew Charitable research also indicate that the payday loans in the U.S. are taken mostly for subsistence or recurrent spending as opposed to funding emergency cash needs. The interest rates charged on U.S. payday loans also remains higher than other alternative short term loans. The difference in regulation per jurisdiction is to blame for misinformation as well as ongoing unfair lending practices in the industry.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
Payday Lender The Money Shop On Sale Due to ''Tough Times''

Payday Lender The Money Shop On Sale Due to ”Tough Times”

DFC Global, the American owner of payday loan lender Money Shop, has put the company up for sale as the company shifts focus from the increasingly regulated payday loan business in the UK.

Although DFC Global says it received a bid approach offer from an unnamed suitor, the company also admits that the Money Shop has been facing difficulties over the past few years now.

The recent crackdown on rogue UK payday loan lenders and tightening regulation has pushed DFC Global to reconsider participating in the UK payday loan industry. Since buying the Money Shop back in 1999, DFC Global has closed down more than 50% of its stores in the UK in the past couple of years as the company looks for ways of coping in an increasingly difficult business environment.

About DFC Global

DFC Global is an American-based financial services company with operations in 1000+ locations in 7 countries. DFC Global focuses on low income or bad credit consumers offering short term loans such as payday loans. The company also provides pawnbroking as well as gold buying services. DFC brands include; The Money Shop in the UK and Ireland, Insta-Cheques, We The People and Loan Mart. The company owns high-end pawnbroker, Suttons & Robertsons and also operates online short term loan lenders such as Payday Express and Payday UK.

In 2009, DFC Global was UK’s largest payday loan provider with a market share of approximately 25%. The company which was previously known as Monetary Management Corporation changed its name in 1990. DFC Global is owned by U.S. private equity firm Lone Star Funds.

The sale

DFC Global is believed to have hired KBW (Keefe, Bruyette & Woods) investment bankers to sell Dollar UK which owns; the Money Shop, online payday loan companies Payday UK and Payday Express as well as several pawnbroking businesses owned by DFC.

According to a DFC spokesman, DFC is aware of the ongoing media speculation on the sale of the Money Shop. However, the company insists that the details remain confidential between all the parties involved. DFC, however, reveals that an approach bid has been made and the company plans on assessing the offer in the ”normal” manner.

UK payday loan lender struggles

Most UK payday loan lenders have struggled to stay in business since the Financial Conduct Authority (FCA) began tightening regulation and cracking down on lenders using unfair lending practices.

In January 2015, the FCA capped the interest rate to 0.8% per day ensuring payday loan borrowers never pay over £24 in interest charges for £100 loans granted for a month. The FCA also capped the total fees and charges applicable ensuring borrowers never have to pay more than they borrow in fees and charges.

Since then, many payday loan lenders in the UK have closed shop. The Money Shop has closed more than 300 branches in the UK alone. Currently, the lender has reduced its branches from over 600 to 230 in an effort to remain profitable in an increasingly difficult business environment.

The Money Shop has faced other struggles besides having to close down most of its branches. For instance, the lender has also been forced to pay fines for unfair lending practices. Just recently, the Money Shop was ordered to pay some of its customers (147,000 customers) £15.3m as compensation for unfair lending practices ranging from system errors to bad affordability checks and debt collection practices.

According to DFC, the lender has since changed its operations by choosing to focus on pre-paid credit cards as well as longer term loans. Although this move among many other moves taken have been deemed viable, the Money Shop is still posting losses. According to the lender’s recent accounts, the UK business suffered a full year loss amounting to £104m in 2015.

Speculators have no choice but to make the worst assumptions regarding the sale of the Money Shop. Although it is clear that the Money Shop is struggling to adjust to the FCA’s new rules and guidelines on payday loan lending like most payday loan lenders in the UK who had been used to lenient rules and guidelines, a sale, that will hopefully reverse the fortunes of the lender is underway.

DFC is also banking on the fact that the Money Shop has changed operations to focus on more profitable/less risky lending.

The Money Shop is a major sponsor of football club, Wolverhampton Wanderers.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
Are Short Term Loans Risky? What You Need To Know

Are Short Term Loans Risky? What You Need To Know

Short terms loans such as payday loans are regarded as risky by many, however, is this really the case? If you’re looking to take out a short-term loan, but you want to know what you’re getting yourself into first, look no further. Here’s what you need to know and do to minimize the risks

Possible risks

Like any other kinds of loans, short term loans such as payday loans have risks. The most common include;

1. Misuse: Short-term loans are prone to misuse more than any other types of loans. As a result, there is always a risk that you won’t use any short term loan you take responsibly. You can do away with this risk by being a responsible borrower. You should borrow short term loans like payday loans when you have pressing needs only i.e. when you have emergency cash needs.

2. Repayment risks: Due to the short term nature of loans such as payday loans, there are higher risks of failing to meet repayment obligations as stipulated in the terms. Typically, payday loans are supposed to be paid off in full using the next paycheck. If you don’t borrow more money that you can repay comfortably, there is a high risk of having difficulties repaying the loan in full. The best way of avoiding this repayment risks is to always make sure you can repay the loan amount in full without difficulties during your next payday.

3. High-cost risks: Short term loans also tend to be more expensive than regular loans, so there is a high likelihood of being overcharged especially when you don’t take the time to borrow from reputable lenders. Payday loans are good examples of expensive short term loans if you borrow without doing your homework. There are very many unscrupulous payday loan lenders in the UK who overcharge their customers by using confusing terms and conditions. To avoid this, you need to borrow from reputable UK payday loan lenders only like Swiftmoney.

4. Habitual borrowing risks: Short term loans are also known to cause habitual borrowing i.e. borrowing when you don’t need to. You should never get a short term loan simply because it is available to you otherwise you stand to plunge yourself into a never-ending debt cycle. Furthermore, the loan might not be available to you later when you really need it. It is worth noting that failing to repay any loan damages your reputation as well as your credit rating.

5. Scams: There are also more scams associated with short term loans than there are scams associated with long-term loans. The popularity of short term loans like payday loans has attracted a lot of unscrupulous lenders out to exploit lenders. Some even pose as lenders only to steal the identity of their clients. The importance of dealing with renowned payday loan lender or broker can’t, therefore, be overemphasised. In fact, dealing with a renowned payday loan broker like Swift Money can reduce most risks associated with payday loan today.

Verdict: Are short-term loans risky?

Short term loans can be very risky if you are dealing with a bad lender. When you choose a good lender, you get rid of most of the risks associated with short-term loans. First and foremost, there’s need to worry about scams if you are dealing with a registered lender with all the relevant FCA authorization. You also don’t need to worry about paying a high-interest rate or paying more in fees because of hidden terms and conditions.

It’s also possible to reduce the risks associated with short term loans by being a responsible borrower. If you borrow a payday loan for emergency reasons only, there should be no cause for concern. A responsible borrower also uses his/her loan for the intended purpose and repays the loan as agreed. Being a responsible borrower eliminates risks of misusing your loan, having repayment problems as well as becoming a habitual borrower.

In essence, short term loans have risks. However, the risks can be eliminated by choosing a lender wisely as well as practicing responsible borrowing behaviour.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.