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What is High Cost Short Term Credit (HCSTC)?
Every loan or credit which fulfill following three criteria will called HCSTC:
1. Loan term should be up to 12 month.
2. Annual Percentage Rate (APR) of interest should be more than or equal to 100%.
3. No pledge, charges or mortgage is asked for security of loan

What is popular types of loan in this category?
Payday loan, text loan, short term loan, unsecured loan, student loan, unemployed loan are some popular funding name which fall under this category.

What is special about this type of credit?
Many lenders ware exploiting the borrows under this category till 2014, so UK government has decided to regulate this and appointed a regulator FCA for this purpose. Now this type of lending is fully regulated since 2015 and saving around £150m from 60000 borrowers per year due to strict compliance.

What limits or caps set by the regulator to save the borrowers?
1. The interest rate including all fees can not be more than 0.8% per day, means APR 292%.
2. The penalty for default can not be more than £15.
3. All interest plus penalty can not be more than amount borrowed under any condition.
4. Interest charged will be simple not at the compounding rate.
5. These rules will continue till year 2020.

What about broker’s charges or fees?
All fees or commission paid by the lender is included in the above cap 0.8% so no question of any payment to any body above this.

How lender see these regulations?
Earlier lenders are charging very high APR but now APR is capped and the margin of lending business for HCSTC is reduced very much. Many old popular lenders are out from the market and many are struggling hard. But some new lenders are using latest technology to reduce their cost ratio and doing well.

What is current trend in HCSTC market?
As we have discussed above these loans are high risk lending from lender’s point of view so they are very strict in loan approvals. Lender offer these loans for very short term say for few days to 3 month and loan amount is also limited up to £1000.

How to get better deal with lender?
Lender’s are working hard for cost cutting in payday loans so they have optimized the use to technology and trying to eliminate middle man(broker) by direct dealing with borrower. They have their own websites which are 24/7 up to connect loan seekers and they offer special discounts for their old customers. So payday loans with direct lender will be the better option.

How brokers are operating?
Brokers are also authorized by the FCA and they are agents to many lenders. They find loan prospects through their offices and websites and sale these leads to maximum paying lender.

Who will pay this commission to broker?
The commission paid to broker is come under the definition of fees which is included in interest charged to borrower and this is paid by the lender only.

Any guarantor or collateral is required for HCSTC?
No, as these loans are fully unsecured so their charges are high.

What about credit check in these loans?
As these are unsecured loans so lender uses all information to satisfy about the financial status of the borrower, credit check is a valuable source to know past credit transactions.

What if poor or bad credit?
All credit score persons can apply for these loans but their approval will be subject to proof of good financial position at present.

What will happen for loan default?
Your interest will continue till final repayment and a penalty of £15 will be additional but all in total amount(principal+interest+penalty) can not be double the amount you have borrowed.

Author
Categories Payday Loans UK, Text Loans UK

Posted

1.Flexibility in application time
Online mode of text loans has bring great relief to persons who are in urgent need of cash but have no time to visit lender’s office. For example the employed persons who have to take leave to search cheap loan from this lender’s office to that lender’s office. By online application you can apply and search payday loan in quick time span at your home or office. Here you have full freedom for choice of place and time for loan application.

Instant decisions save time
Many lenders use latest technology in loan application processing so you can get quick response to your application. If you wish to proceed further then ok otherwise you can try with other lender’s website.

No paper check is required
Online loan system is fully computer driven so no hard copy of document is required. If lender ask for some proof regarding your income or bank details you can email them.

Free loan quote
You can get many free loan quotations with different lenders or brokers website, now compare them and take your beneficial decision.

Free market survey to find the best
By comparing loan quotes and reading review about that lender you can easily find the best loan solution.

Fast loan payouts
when your loan is approved by the lender and you agreed upon their terms, money will directly credited in your bank through wire transfer in next few minutes if you have finished it before 3pm in any working days.

Automated loan repayment
Lender will ask you to sign a digital mandate form after this loan amount is directly debited from your account on pre-decided date.

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Author
Categories Payday Loans UK, Text Loans UK

Posted

Payday loan interest and penalties are regulated by FCA (Financial Conduct Authority of UK). On 02/01/2015 they have notified rules for short term funding to protect customers from any over charge by the lenders. Some important point are:
1. Lenders will charge only simple interest and not compounding.
2. The cap for daily interest rate will be 0.8% and lender can not charge above this rate.
3. Penalty for loan defaults can not be more than £15.
4. I no case interest and fees can not be more than principal amount.

Explanation of FCA rule:
1. Simple interest means, interest will be charge on principal amount only on day to day basis and no interest will be charge on interest it self. For example £0.8 interest will be charge for £100 loans per day so for 20 days term interest will be £.08×20=£16 and total amount payable after 20 days will be £116 only.
2. The maximum interest and fees is fixed as £0.80 per day for £100 this includes all expenses and commission paid by lender to brokers( in the case of loan applied through broker).
3. If borrower fail to repay on time then penalty can not be more than £15 and interest will be continue till the final re-payment, subject to maximum limit of amount borrowed.
4. Under any circumstances interest+penalty+collection charges can not be more than the amount borrowed.

What will be the payment schedule if repayment term is more than one month?
Here we explain by taking payday loan amount as £600 for 3 month.






Borrowed amountLoan termInterest amountRepayment afterAmount PaidBalance Amount
£6003 Month£144First month£48£696
Second Month£48£648
Third month£648£0

As per FCA regulations the APR (Annual Percentage Rate) is £0.80×365=292% per year.

Author
Categories Payday Loans UK, Text Loans UK

Posted

What is credit score?
When you go for first time credit or loan from a bank, your credit record is generated with credit score agencies.

What about if I have not taken any loan or credit?
In this situation your credit record will be absent in agency’s database.

How no credit history is valuated for loan approvals?
This is not good for loan seekers because lender have no clue about your past loan transactions. So they may be reject your application despite of you fulfill all other criteria.

Is credit record is helpful in getting loan?
Yes, one should take one loan or credit card to initiate credit recording.

What is bad credit?
There are many reasons for poor credit score, some of them like
1. Credit card or loan repayment defaults or late re-payment.
2. CCJ against you.
3. You are a guarantor for some one else and he has not repaid in due time.
4. Bankruptcy etc.

How to check if my credit score is poor?
From time to time you should check your latest score with different agencies and try to improve it. You can check your score 24/7 online with these agencies free of charges.

What are the impact of bad credit in getting fresh loan?
Every lender have their own calculations for poor or bad credit score and they do not accept loan below this ratings. They do not suppose to give reasons about their loan rejection. If some lenders agrees to fund they may charge higher interest rate and approve loan for small sum.

How to get cheaper loan even with bad credit?
You may go with following options to get loans with normal rates:
1. Find one guarantor with good credit score
2. If you have your own home or auto, you can put this as collateral. But this is a risky option should be avoided.
3. Convince your lender about your sound financial status with some proofs like bank statements and salary slips.
4. Show your regular payments details of bills like gas bill, house rent receipt or electricity bill etc.
5. Changing of house frequently also adversely affect your credit so if you are staying for long time in a house will be good proof of stability to show the lender.
6. Improve your credit score by repaying many outstanding loans with one big personal loan.

Author
Categories Payday Loans UK, Credit Score

Posted

Can payday loans be taken as installment loans?
Few months back payday loans are meant for maximum 30 days term, but now in changed regulations these short term loans can be used as installment loans.

As name suggests payday loans are based on borrower’s monthly income and are to be repaid in next salary. The main drawback of this system is that loan amount can not exceed the monthly savings of the borrower. So loan amount of payday loan is limited to small sum.

The concept of installment loan in payday loan has increased the loan corpus for the borrower. Now loan seeker can apply for high sum (some time it may be more than one month salary) and he can pick any number of monthly repayment schedule as per his financial needs.

The monthly loan installment is EMI of loan plus interest and due date is taken as salary day of the borrower. One mandate is taken from the borrower for auto debit of loan installment from his bank account.

Why installment unsecured loans are costly?
Unsecured loans are approved by the lenders without any guarantor or security so the fall in high risk category of loans. To mitigate possible losses lenders charge high interest rates. As installment loans are more than one month term so interest rate is always more than old one month payday loans. FCA has fixed cap for payday loans as 0.8% per day so as number of day increases the total repayable interest will also rise. So payday loans are not good for long term. For long term loans secured or personal loans are the best.

Author
Categories Payday Loans UK, Text Loans UK