If you decide on a payday loan is the best option for you, you’ll want to know how much you can borrow. The difference between using licensed or unlicensed lenders is that unlicensed lenders operate outside the parameters of the law. This is why it is important to use a trusted broker like ready now when you need money now.
This means that they often exceed the maximum allocation rates. Approved lenders are regulated by the Financial Conduct Authority (FCA) and must follow certain codes of practice which offer protection to borrowers, including allowing them to borrow only the amount they can afford to repay.
What is a personal loan? Easy to get payday loans are small, short-term loans where you repay both principal and interest in one date. The average payday loan is currently around Â£270 for 30 days. More and more lenders are offering slightly longer payday loans and borrowers can repay in installments. What all payday loans have in common is that they are short term and are usually small amounts, ranging from around Â£200 to Â£1500.
Responsible lenders only provide what borrowers can afford to repay: Approved payday lenders must clearly disclose their terms and conditions, including the fees they charge and the annual percentage rate (APR). Borrowers should read these terms and conditions to know what they can expect to pay. Borrowers may complain that their payday loans are unaffordable and that the lender acted irresponsibly in extending the credit. Before lending you money, a reputable lender will check if you can repay it.
You must have enough money to pay it back, which means you must have a monthly income and a bank account. The lender should also explain the key features of the loan, such as how much you need to repay and what happens if you default.
The Financial Conduct Authority (FCS) caps costs: Rules set by the FCA cap the cost of payday loans. They limit the amount of interest that lenders can charge. For most borrowers who repay their loans on time, a cap on fees and charges provides substantial protection. The FCA does not allow interest and daily charges to exceed 0.8% of the amount borrowed. The FCA also limits how much lenders can charge you if you’re having trouble repaying what you owe on time. The maximum they can charge if you fail to repay your loan is Â£15.
A cost cap for all interest charges and charges was put in place to ensure that borrowers would not end up paying more than the amount they borrowed in the first place. There are borrowers who have complained that they borrowed Â£200 and owe Â£2,000 with all interest charges and charges. So now, if you borrow Â£100, the total amount you pay back shouldn’t be more than Â£200.
Limit rollovers: If you’re having trouble repaying a payday loan, payday lenders may offer you an extension, also known as a rollover. A rollover works by entering into a new agreement for the repayment of your original loan. The problem with doing this means having to pay back more money to the lender in interest, additional fees or other charges. You could end up over-lending and never being able to repay. A number of lenders will accept rollovers even when a customer is in financial difficulty and the loan is not sustainable. Approved lenders must now prove that renewing a loan, even once, is in the client’s interest.
Why lenders need to explain CPAs: Most borrowers repay a loan through a bank debit card. A Continuous Payment Authority (CPA) allows the lender to withdraw the money from your bank account. It’s convenient to set up automatic payments with an online payday lender. However, you should never do this with an unlicensed lender who may end up making multiple authorized withdrawals.
Lenders need to make sure borrowers know what they are signing up for, how CPAs work, and that they have the right to cancel one even after signing up. Some lenders try to make partial payments over several days or weeks, which can cause serious financial hardship for borrowers.
The bottom line: Falling into the hands of an unapproved lender may mean you can take out payday loan after payday loan, but it traps you in a cycle of debt where you’re never really able to repay what you have borrowed. You find yourself more and more in debt. Using approved lenders means they must follow certain regulations that promote responsible lending. They allow you to take out a small payday loan of between Â£200 and Â£1,500 that you can repay in full and on time.