A majority of online borrowers apply for payday loans despite the high cost involved. The financial watchdog in the UK, the FCA has also put across a lot of restrictions on payday lenders to safeguard the interests of borrowers. However, news involving loan sharks keep on surfacing every now and then.
A recent report highlighted how the search engine Major Google rakes up millions of pounds from adverts for payday loans with APR % up to 1,297%. The news report highlighted how such ad campaigns push borrowers to high-interest loans. Unlike America, where there is a ban on adverts of personal loans with higher than 36% annual interest rate, lending companies in the UK are actively using Google Adverts to promote very high lending deals to the borrowers.
Categorically a single search for “payday loans” shows more than 6 leading names in the industry. In 2016, Google had introduced new regulations when it banned Adverts for payday loans posing repayment periods of 60 days or less. However, it did not cap the amount of interest component.
These adverts can be largely misleading to desperate borrowers. For instance, Swift Money in one of these Ads offered high-risk loans with APR % up to 1,255%. At the same time, they boast off that they can deposit £50 to £1,000 in “10 minutes” post the approval.
Posing a straight breach to FCA regulation, QuidMarket said it can offer £500 loan for over five months at £367 or fixed annual interest rate of 292%. However, the information is half-baked as representative annual rate should include compound interest too which comes out at 1297%.
These trends can be financially suicidal for borrowers with poor credit health. Herein it is thus important to know how to identify the safe payday loans among so many disingenuous offers flooring in the market:
- Assess your repayment capacity.
Before you apply for a payday loan to assess your credit report. You must clearly know how much you need and for how long. It is important to draft a repayment plan. Borrow according to the instalment that you can afford. Carefully evaluate if you have a surplus for a loan or you need to work additional hours for repayment. You can choose the loan according to instalment you could afford.
- Identify loan sharks
A lot of loan sharks are active online and they target borrowers who need urgent loans. Be watchful of the lenders who contact you out of the blue.
- Deal with registered loan partners only
The safest route is thus contacting a registered loan broker. When you contact an FCA regulated loan broker you could rest assured of dealing with reliable sources.
- Do not pay upfront fees
The biggest risk involved with unscrupulous lenders is they can vanish after receiving upfront fees. It is thus recommended to deal with experienced lenders and that too without paying any upfront fees. A broker can help you gain direct access to available loans without any fees.
- Know the cost of the loan
Never forget to ask for details about the loan cost. Many times there are more costs and charges involved.
- Check all promises in writing
Beware of verbal promises. Have complete paperwork. Read terms and conditions carefully.