Within the online market for borrowing a small sum of money, known often as the payday loan market place, there are several different ways of borrowing and furthermore, several different types of lenders. Nowadays customers have the ability to borrow flexible amounts, usually ranging in value between £50.00 and £500.00 and then have a choice of different repayment terms. The repayment terms usually range from a single month and then if needed can be split over 2, 3 or 4 months and so on accordingly. The two different types of lender who exist are known as the direct lenders and then the loan brokers and both serve a purpose in the market depending on the service required by the individual applicant. Over the years since online loans of this nature were introduced the market has changed and adapted quite considerably.
Early days saw a less flexible resource for borrowing and mostly comprised of a very specific product format. This format was the very well-known payday loan which allowed customers the simple ability to borrow until their next employment pay date. Those who could not repay the full sum due on the agreed date were subject to increased costs and also charges. That said, the original product was reflective of consumer borrowing habits at the time and these particular loans served a void in short term consumer borrowing. It is as the years have passed and lenders have developed and worked upon understanding their customers better that vast improvements have been made by both the direct lenders and the other providers, the loan brokers.
In the current day market place both the direct lenders and the brokers are managed and therefore governed by the Financial Conduct Authority and this means they must practice within a specific set of rules and guidelines. This makes for a more stable and trust-worthy consumer market as there is much better consistency across the board. Direct lenders offer customer the service of being considered for a loan directly and therefore ‘in-house’ and this means the lender with whom the application is completed, is the same lender who will deliver a final decision as to the outcome of the applications status. Typically given direct lenders operate in-house, they do not charge a fee for the service which is provided; meaning whether the application is successful or not, the lender will not charge the customer a fee for doing so. Loan brokers operate differently to direct lenders even though they exist in the same market space. Brokers will perform a service whereby they will take the applicants details and then attempt to find a suitable lender for them based on these. In some respects a broker operates like a comparison site and can assist in locating a potential lender. A broker does not therefore deliver the final decision as to the success of an application and instead this will be done by the lender should the applicant go on to apply fully with the proposal. Brokers usually charge a fee for this service.