When considering the applications of customers, short term loans lenders will have the concept and application of ‘affordability’ are the heart of their approval process. There is increasing pressure on short term loans lenders and all lenders alike to ensure they grant loans only when it is truly suitable and affordable to the individual needs of the applicant in question. As such applying rules focused on affordability has become an ever increasing presence in the approval process of borrowing. In the case of short term loans this requirement came into full force when the Financial Conduct Authority took control of the market in its entirety a few years ago. Since their introduction, the FCA (common name for the Financial Conduct Authority) has helped lenders transform their approval procedures, product offering and ultimately level of customer service they provide. Through in-depth research as to how the market existed in its original form, the FCA was able to establish that too often lenders were not able to successful identify if the loan being requested was truly suitable and this was mostly attributed to the lack of affordability based assessments during the approval process. Today the short term loans market has been completely transformed in terms of both the product and service and as such, lenders are making smarter and better decisions concerning the outcome of their applications.
What the FCA fundamentally identified is that short term loans lenders were not providing enough flexibility in their product offering and therefore were often unable to often a form of borrowing which was considered affordable. Affordability in the context of the FCA and these loans means that the lender must ensure they have performed adequate checks to assess the suitability of the requested loan and furthermore, can conclude that the loan offered is affordable. Given the fact that at the time, many lenders were still offering a single repayment style of short term loan, it made making the loan affordable to the various individual needs of customers difficult to achieve. This combined with the fact that such lenders were not fully assessing the credit reference file information readily available, meant that in many instances loans were being granted which simply were not suitable.
Nowadays with affordability assessment at the heart of the application process for short term loans, lenders are better able to understand whether a new borrowing resource would be truly affordable. This is further reinforced by the fact that lenders are giving customers the ability to repay loans via the means of more flexible repayment terms. This is being delivered by the addition of instalment based short term loans. In fact, nowadays the vast majority of lenders who operate within this multi-million-pound market place, offer only instalment based borrowing. This means instead of only offering the ability to repay a proposed loans a one-off and sizable single repayment, lenders are presenting a number of different monthly based instalment loans, allowing consumers to be active in making a sensible and choice driven borrowing decision.