It is almost unimaginable that any adult in the UK today will not have heard of payday loans – they have been constant media topics for the last couple of years but, like so much we see in the press, what is fact and what is fiction, is sometimes a little difficult to decide.
Payday Loans Since 2005
Payday loans have been a feature of the UK financial scene since about 2005 but the market saw substantial growth from about 2010.
Opinions were sharply divided – users generally loved them and politicians, consumer groups and latterly, the regulators were more critical. In many cases, the concern was well-founded. Many borrowers found that it was so easy to get loans that they took multiple loans that proved to be unaffordable. Many lenders did not do credit checks and employed aggressive collections approaches when loans were not paid back. And of course, on top of all of that, some of the loans were marketed at exorbitantly high cost.
What Changes Have Been Made?
So, what has changed? New rules introduced by the Financial Conduct Authority during 2014 have radically changed the way that the short-term loan sector works. Customers must receive clear information about how loans work and about the risks if things go wrong. There are new restrictions on how frequently loans can be extended or rolled over and there is a cap on the cost for each loan.
Payday Loans Versus Instalment Loans
As a result, some payday lenders have introduced instalment loans, making it easier and cheaper for customers to spread their loan cost over a longer period and reducing the need for them to borrow too frequently. Loans for 3 months and up to a year are replacing the traditional payday facility that ran from a couple of weeks up to about a month.
More change is on its way. Following completion of an investigation by the Competition and Markets Authority, new requirements for advertising and information provision are to come into play over the next 12 months and customers will get real-time information about how much loans cost them over a rolling 12-month term.
MYJAR's Alternative to a Payday Loan
MYJAR has always believed in acting responsibly. It never allowed rollovers and always helped customers if they got into financial difficulty. MYJAR was also one of the very first short-term lenders to cap its charges, even before it was required to do so by the FCA. We provide an alternative to a Payday Loan which offers first time customers a loan from £100 to £3600 for up to 12 months, subject to eligibility.
There remains a need to build confidence on all sides but the changes across the industry have been a good start.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk