Payday loans are now the number 1 choice for UK consumers seeking fast and short term finance with approximately 8 out of 10 people opting to apply for a same day payday loan, as opposed to entering a lengthy application process with many of the leading high street banks. Figures released by the bank of England in the third quarter of 2015 suggests that the number of UK consumers applying for payday loans has almost doubled in recent years.
The FCA (Financial Conduct Authority) recently introduced new guidelines and lending restrictions to prevent many payday lenders from charging high interest rates. The result of the new interest rate cap enforced by the FCA has already seen large high profile fines issued to a number of the top lenders for breaching the interest rate caps that were first imposed in 2014.
As a result the UK’s top lenders now offer a lending service that is much more affordable to UK consumers with all payday lenders now forced to carry out an affordability check before approving or rejecting an applicant to ensure that the individual applying can afford repayments and total amount repayable.
Affordability checks are a mandatory process that many UK lenders need to complete before an applicant is accepted or rejected. The check itself takes into account, income, homeowner status, age and other financial information such as pensions and employment history.
The new imposed interest rate cap on all lenders has ensure that UK payday loans are a lot more accessible and affordable for those seeking fast and short term finance as opposed to borrowing from a bank or finance company with a minimum repayment term of 3 months.
Due to the heavily regulated payday loan industry, lenders are automatically forced to offer competitive rates that now favour the applicant as opposed to the lender providing the funds which is why the industry has experienced explosive growth over the past 2 years.