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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