Payday Loan

Is a Payday Loan Safer Borrowing Option in the UK?

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Payday loans have always been the focal point of the city’s financial watchdog – the Financial Conduct Authority (FCA) for over years now. Initially, there were no measures in place for regulating these loans and therefore, consumers were being exploited. However, in the year 2015, the financial regulator took an initiative to regulate the payday loan market by implementing a cap. Also, it lays emphasis on protecting consumers from illegal loan sharks and astronomical rates of interest. There are several measures that have been taken by the FCA to standardize the financial services market in the United Kingdom.

In this blog we will discuss:

What is a Payday Loan?

According to the FCA, these Payday Loans are also called as high-cost short-term credit as traditionally, these loans were repayable within a duration of a month in a single instalment that attracts high annual percentage rate (APR). However, the lenders are now offering this loan for a period of 12 months as well. It has to be repaid within twelve months and can be borrowed without using any kind of security that makes them unsecured loans.

How safe it is to borrow a payday loan online in the UK?

Borrowing a payday loan in the United Kingdom has become safer than ever before with proper and effective corrective measures in place. Following the implementation of capping on loan charges, all financial firms:

  • Must not charge more than 0.8% in fees and interest per day of the amount borrowed.
  • Default fees must not exceed £15.
  • And borrowers must not pay more than 100% of the amount borrowed in fees and interest.

Apart from this, the FCA encourages fair pricing in the financial markets and also states that the firms should communicate everything to the consumers clearly and not to mislead them. Therefore, it can be concluded that Payday Loans that are offered Without Guarantor are a safer borrowing option in the United Kingdom.

How to borrow a payday loan in the UK?

You will find a lot of options to consider when searching for these loans online. Make sure that when you make the decision to borrow a loan, you must choose a firm authorised by the FCA to safeguard your own interest and to avoid any probable scam.

  • Visit the lender’s or loan broker’s website and choose the loan amount and term.
  • Fill in the detailed application form and submit it online.
  • Wait for the decision of the lender.

The lenders generally conduct a credit check to assess the loan eligibility before making their decision. And a few lenders prefer to conduct a soft search to make initial offers. Try to apply for Payday Loans with Soft Credit Check to protect and maintain your credit score. As soft credit checks don’t leave any footprints on your report. But a hard credit check will be conducted before the final approval by the lender as per the law.

The bottom line- Payday Loans UK

Taking a payday loan is considered safe but if you do not make the repayments on time, it may create a financial disaster. Any loan that is borrowed must be repaid responsibly. If you are not sure of the repayments, it’s better to consider other alternatives for monetary resolutions rather than choosing to go ahead with a short-term loan.

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