If you live in the UK, chances are high that you’ve heard of payday lenders offering short-term, unsecured loans to those in desperate need of cash. You may have also heard of some horror stories relating to this type of credit. This guide has been written to help those seeking an urgent personal loan avoid the pitfalls that these tales generally relate to. By being aware of your rights as a consumer, you can then find a suitable lender and figure out which credit option will be the best for you.
Licenses from the Office of Fair Trading
Within the UK, it’s necessary for all payday lenders to be registered with the Office of Fair Trading (OFT). Following the Consumer Credit Act 1974, all providers of consumer credit should be listed on the official register. Before agreeing to a payday loan, check the lender is on the Consumer Credit Register on the OFT website. This first step will help you weed out the dodgy firms and gain the ability to work with the best in the industry. Thankfully, the UK government makes it simple to find legitimate lenders who can help you find the money that you need in a hurry.
Clear, Concise Conditions Before Borrowing
All loan firms are legally obligated to notify their clients of the terms and conditions prior to anyone finalising the contract. These details are quite varied and include important loan aspects such as:
- The annual percentage rate (APR)
- The total fees required for the loan
- Penalty or early payment charges
- Preferred transaction methods
- Due date for all loan repayments
All of this should be clearly written out in the contract so the client fully understands their obligations and responsibilities. If there is any confusion, the lender cannot let an individual sign the contract until everything is explained in an open manner.
Advice on Properly Using Payday Loans
Since these short-term loans are only suitable for one-off, emergency purchases, the lender has a legal obligation to tell this to their clients. If that individual wishes to use this credit option to pay off a recurring expense or use it on a non-necessary payment, they should suggest other borrowing options that are more suited to these financial costs. In this way, the client will end up with a credit option that matches their needs and lifestyle, ensuring they can pay everything back in a better manner. Responsible borrowing starts with solid advice on the proper use of payday loan products.
A Written Copy of the Loan Contract
If you decide to take out one of these short-term credit options, you should always be supplied with a written copy of the financing agreement. This also applies for lenders who are based online as they should send you the loan agreement via email or post. Those applying for quick payday loans should ask for a copy of the contract. If the lender refuses to send this to you, it’s a sign that they may be up to no good. On the other hand, if they are happy to deliver this important document to your inbox, this is another sign that they are a reputable lender. Transparency is always a positive quality when it comes to personal loans.
Proper Background Checks on Application
Another legal obligation for payday lenders is that they conduct full background checks on their clients before approving their loan application. This includes:
- Age
- Proof of identity
- Residency
- Income
- Expenses
- Employment status
- Bank details
- Mental health
The lender may or may not check your credit history. Since this is a short-term loan, generally paid back in about a month, your current financial situation will be more important. Just make sure that they go over your personal details though to double-check that you can indeed pay everything back on time and in full.
Credit Checks When Conditions Change
These investigations should also occur if you decide to roll over the payday loan or borrow further. Whenever the conditions of the contract change, it is the firm’s legal obligation to make sure you are capable of repaying everything without struggle. In all cases, payday lenders should satisfy themselves that you are financially stable. If they are a reputable agency, they will only lend to those who are capable of meeting the loan conditions instead of preying on the weak to exploit greater interest and extra fees. Working with the best is a matter of ensuring the right checks are made.
Notification of Automated Payments
Within the payday industry, the most common repayment method is direct debit. In this case, the loan firm will automatically deduct the money from your bank account on your next payday. To do this, they are legally obligated to:
- Notify the lender in advance of this future transaction
- Never make repeated attempts to retrieve the funds
- Give the client the option to cancel this payment
Basically, the borrower should be in control over when the transaction goes through. In this way, the payday loan will be repaid in a suitable manner via direct debit. The client won’t be left in a financially awkward situation when their bank account is unwittingly emptied by the lender’s automated transactions.
No Harassment with Repayment Enquiries
One final right that the UK individual has is freedom from aggressive repayment enquiries. If you miss a payment or have to extend the loan period, the lender should be willing to sit down and discuss ways out in a friendly manner. They should never use threats or blackmail to get you to meet the agreed to loan conditions. Calling up multiple times during business hours or sending around the debt collectors within a few days is never suitable behaviour. Rather, you should seek a lender who’s willing to negotiate and help you get through this difficult financial situation.
This information should now help you locate a reliable payday lender and take out a loan that you can afford to pay back! Using these short-term credit options in a suitable manner is merely a matter of knowing your legal rights.
