When applying for a short term loan there are a number of different stages which will need to be completed before a lending decision can be made. These stages are designed to ensure that the loan requested is suitable and affordable and in doing so avoid granting loans which are not financially suitable. Short term loans like all other forms of borrowing are accessible via the means of a legally binding loan agreement and therefore should not be entered into lightly. As we would with a new credit card, bank loan or Hire Purchase agreement, when it comes to short term loans we should be sensibly considering the options which are available and then making an informed decision. Providing it is decided, through research, that short term loans are the most suitable choice, the application process is actually very simple and straight forward and details of which we will discuss in greater detail here today. Firstly, let’s look at a brief summary of the type of loans which are available from short term loans lenders. Short term loans, as the name suggests, give the facility to access a small sum of money as a loan, usually in the region of £300.00. The terms of repayment are considered flexible, given the fact that many lenders offer instalment based borrowing. This means repayments can be spread over a number of months, the term of which is selected at the point of applying. Depending on the loan value and the lender terms typically range from a single payment (also known as a payday loan) and extend right through to as many as 6 months in most cases. This means whether an individual wants to borrow £250.00 over 3 months or £300.00 over 6 months, there is likely to be a lending option to meet the need.
To apply for a short term loan, the application will almost always be via an online application form. This means the process can be completed with any internet enabled device, whether that be a tablet, mobile or laptop. These application forms have been developed over time so usually their clear and simple nature means they can be filled out and submitted in as little as 5 minutes. It is absolutely vital that the information supplied is accurate and up to date, as supplying incorrect or out-dated information will almost certainly result in the application being declined. Once the application is fully completed and submitted the lender will immediately run the application through what is known as a ‘decision engine’. The decision engine is a combination of all the electronic checks required to be completed by the lender and will decide if the application can be progressed any further. Providing this stage is passed it is likely then that most lenders will then undertake a manual review of the application, to ensure nothing has been ‘missed’ and furthermore if any additional checks need to be completed. It is only once all these checks have been passed as required that the lender will be able to grant the short term loans resource requested.
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As many of us are aware one of the preferred choices for borrowing a small sum of money are via the means of online short term loans. Given the online nature of these loans many consumers find them to be the most suitable choice, given their discreet and simple nature. Short term loans in a general sense have been available online for over a decade in fact and as such the vast majority of consumers are aware of the product and service being offered. Over the years this market has changed quite considerably and nowadays the lenders who operate are not, in the majority of cases, the same lenders who for many years occupied the market. This fact can be attributed to the fact that over the years the manner in which these loans are offered has completely changed and as such, many short term loans lenders have in recent years left the market place altogether. A change in consumer needs and spending habits has meant that the originally offered type of short term loan became a dated and un-needed product. Those lenders, who either did not want to change or refused to, are in the most part now gone from the market entirely. A change to who regulates the market coupled with changing consumer needs has meant in recent years the entire market place has had to transform. Nowadays the modern day consumer has become increasingly used to using credit as part of everyday life and as such, no longer favours the option of making a lump sum repayment to pay for goods and services. Instead consumers have become used to using credit cards, home lending products and store credit to name a few of the examples which are available. What this fundamentally means is that consumers prefer and have become adapted to making monthly repayments for the goods and services they buy. Take for example home furnishing, often instead of paying for these outright consumers will take advance of credit based facilities which are frequently offered instead, meaning a manageable monthly repayment replaces the need to pay out a sizable sum of money. These changes in consumer spending habits have been coupled with the introduction of a new regulating body, responsible for the entire operations of the short term loans market. The regulator in question is the FCA (Financial Conduct Authority) it has been their role over the last few years to improve the product and practices of short term loans lenders.
What the FCA did was to place rules in place which would guide those lenders committed to effectively supporting the short term borrowing needs of consumers. These rules allowed lenders to create a more flexible and customer friendly borrowing environment and those lenders who did not wish to modernise their practices did not receive the approval needed from the FCA to continue trading. This means that the modern day market is populated by only FCA approved lenders of short term loans and as such potential borrowers have this security and confidence firmly in mind. The product itself has moved away from the restrictions of old and no longer demands sizable one-off repayments to be made in order to repay the resource. Instead todays loans and the lenders who offer them offer a flexible borrowing resource and this is thanks largely to the introduction of instalment based borrowing. Short term loans in their current form then, have not only the FCA’s requirements in mind but also the modern day spending habits of consumers as we have discussed above. Those of us considering short term loans can therefore expect to find a market which offers flexibility and furthermore, choice. This is because nowadays the lenders operating in this online market offer consumers instalment based borrowing which allows the borrower to make a choice with regards to their preferred instalment amount. This could therefore mean making a selection from 2, 3 or 4 monthly instalments or perhaps 3, 5 or 6 monthly repayments for example. The key point here is that lenders are actively demonstrating their willingness to give realistic and consumer friendly borrowing choices. Some lenders will only offer a specific term of repayment, perhaps meaning a 3 month repayment term for a range of different loan values, however, in the majority of cases there are several different options to choose from. These instalment based loans are quickly becoming the choice most regularly selected by short term loans borrowers and the days of single repayment borrowing is quickly becoming a thing of the past. Many consumers turning to short term borrowing choices now seem to favour the newest of the resources available; the installment loans. These loans are considered flexible and better able to facilitate the true needs of consumers who borrow in this specific manner. In real terms they have only become available in the last few years but are quickly being highlighted as the most suitable of the loans to be released from the online borrowing market. Installment loans have existed in other forms of borrowing for many years but it is only in recent years that this format of repayment has been made available within the short term borrowing market place. Whether its bank loans, store cards or credit cards for example, all of these resources have always been agreed with the understanding that monthly installments would be made until such time that the resource is question was repaid. With short term loans however, in the first years of their decade long life span, repayments were not offered in this way. In actual fact before installment loans the borrowing choice offered by online lenders was much simpler. Many of us will be familiar with the original product in question here and it was known as the payday loan. As the name of this product clearly indicated, uses of the product had to make repayment of the loan on their employment pay date. This meant repaying the loan as a lump sum repayment on this date. Where the product may have been simple and clear in its offering, the fact of the matter was that the repayments due was often too expensive for the consumers who used them. This is why a culture of ‘roll-over’ or ‘extension’ repayments became an ever growing concern within the payday loan market. These rollovers and extensions saw borrowers take the only repayment alternative which was available for the payday loan and one which was costly. For those who simply could not repay the total loan and interest charged by the lender, they instead took the option to repay an interest based repayment instead. This meant paying only the interest currently applicable on the account and then extending the full repayment until the subsequent employment pay date. This style of repayment proves costly and not effective for the borrower as the amount owed did not increase as further monthly interest was applied each time such a repayment was made; meaning the total amount owed never repayment.
The payday loan served to highlight that installment based repayments were in actual fact always the preferred choice among st short term borrowers, it’s just that installment loans in their current form had not been introduced yet. Where for what was many months in some cases, borrowers would successfully repay extension repayments, what was really needed was an installment based repayments from the start of the loan agreement. It was not only the borrowers who had clearly demonstrated the need for more flexible borrowing choices, the new regulating body quickly became aware of this too. This regulator was the FCA (Financial Conduct Authority) and it was their role to review and understand the downfalls of the online short term borrowing market and then make changes to rules and regulations to improve it. The FCA quickly became aware that far too often were consumers using these extension repayments and never actually reducing the amount they owe and furthermore, were increasing the cost of borrowing each and every month that such a repayment was made. The FCA’s objective was simple; improve the quality of service offered to short term borrowers and this has, over time, certainly been achieved. It is as a result of the new FCA rules and additional regulation that the lenders who exist in today’s market are more flexible and customer focused than anything or anyone that came before them. Modern day lenders of instalment loans are the product of the FCA’s findings and all of whom are regulated by the FCA in order to exist and trade. With the FCA approval a provider of short term loans online simply is not able to trade. So not only do consumers nowadays have better borrowing and repayment choices, they also have the added benefit of regulation backing for whichever of the lenders they choose to use. |
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