When it comes to payday loan lenders and the product they offer, many of us still believe the options are limited. The reality is however that a lot of change has taken place over the last couple of years and today the loans and lenders who offer them are a completely different resource to what was once offered. Nowadays payday loan lenders operate to offer flexibility and choice to customers who are looking to borrow a small sum of money. It would be true to say that for a long time the offerings of this online market were limited and as such really only ever allowed a very specific type of borrowing, which is where in fact, the common belief of inflexibility stems from. Thankfully changes to the regulating body responsible for payday loan lenders and continued poor customer satisfaction has meant that the whole market and its lenders has had to transform in order to survive. Today we will be looking at these lenders and the product they now offer, to understand better what has really changed.
As many of us will be aware the original product offering from these lenders was the classic payday loan. Payday loans allowed customers to borrow until the date on which their next pay date fell. This meant usually borrowing for only a few weeks but at the most a month; depending on exactly when the application was submitted. As such the payday loan was a resource which saw consumers borrow small sums of money and if approved, repay the loan and the interest charged by the lender within a short period of time and as a lump sum repayment. Although simple in their approach and easy to understand, what was clear is that for many the payday loan and the repayments they required was for many not an ideally suited way of borrowing.
In order to better meet the needs of customer’s payday loan lenders needed to introduce a new way of lending which was not so restricted and furthermore, allowed more manageable repayments to be made. This fact was truly highlighted when the new governing body; the Financial Conduct Authority, took over responsibility for the market as a whole a few years ago. Through extensive research of how lenders once operated the FCA was able to identify where improvements needed to be made and how the payday loan lenders could improve what they did on a fundamental level. The result of this was instalment based borrowing. Instalment loans now all but replace the old style of borrowing and in doing so offer customers better ways of borrowing small sums of money. Instalment loans mean that customers have a better ability to repay the small sums borrowed because the repayments can be spread over a number of pre-agreed months. Depending on the lender and the specifics of what they offer, this could mean repayments over 3, 5 or 6 months for example.