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In the year 2012, the Consumer Financial Protection Bureau conducted a series of investigations into the world of direct payday lenders being offered by a growing number of depository institutions. http://www.bfwggrants.org.uk
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In the year 2012, the Consumer Financial Protection Bureau conducted a series of investigations into the world of direct payday lenders being offered by a growing number of depository institutions. The purpose of these investigations was to analyze different ways of introducing the customer a more stable, friendly and at the same time a competitive payday loans market. The need for such forums was emphasized in furthering this industry like any other industry but not at the cost of the borrower.
Through this forum, it was found that there needs to be sufficient amount of data that needs to be established which could present a true picture of the payday lending market and what impact they are having on the customer including the need to understand how the use of such products is affecting the borrower from a long term point of view.
This was not just limited to the institutions that were in charge of this industry but first hand consumer feedback was taken which displayed the commitment towards change. Although consumers did favour the accessibility of the loan, the availability of these loans for consumers who don’t qualify for other lines of credit and the consumers ability to use these financial products as a definite mean to avoid overdrawing a deposit account or in the case of late payment of bills.
Direct payday lenders generally serve the purpose of bridging the gap between your income and expenses. No matter what your source of income is, there are always unprecedented expenses which one should be prepared for, is the vision with which this institution was set up. Payday loans are typically charged not on the basis of a predetermined market rate which is usually not subject to change, but on the basis of the amount of loan you have borrowed, irrespective of the loan duration.
Cost: What is the cost of a payday loan? The cost of a payday loan is typically defined by the amount you have borrowed and usually does not vary with the duration of the loan. The cost is expressed as an interest fee usually on the parameter of every 100 pounds you borrow and usually ranges between 10 pounds to 20 pounds. If there is a variation, it is usually because of state laws differentiating from state to state with them allowing maximum payable fees. A fee of 15 pounds for 100 pounds of a loan amount is found to be most common with an average APR of 391% on a typical 15 day loan. However this varies and there are certain lenders who offer APR as high as 6000%.
Eligibility: Many states have a limit on the size of the loan available which could be a maximum of 500 pounds. In order to be eligible for a loan, all you are required to do is to present identification and a documentation of income along with a personal deposit account. There is usually no other financial obligation and your credit score is usually not a precedent in being eligible to apply for such a loan. There are some lenders who check your credit rating through various specialty credit firms to check your capacity to pay and whether you have defaulted on your previous payday loans. Since they have access to your deposit account, there is no other collateral found necessary.
Repayment: Direct payday lenders expect their borrowers to come to the store front on the due date to pay back the loan. If they are unable to do so, there is a fee which is payable to the borrower equal to the finance charge during the initial loan and they are allowed to roll over their loan. However there are certain state laws which are against the rolling over of loans. This means that it is the responsibility of the borrower to ensure he pays back the full loan amount and then quickly takes out another loan.
Limits on Repeated Use: Payday lending has been largely governed by state law and there have been times where there has been legislated to amend state usury laws to allow payday lending in that particular state. Hence, payday lenders are required to comply with the laws of the state in which they function. After the regulations on the industry, the states are making an attempt to limit the sustained use of payday lenders which includes provisions such as limiting the number of times you can roll over a loan, requirements to offer extended repayment plans, grace periods between loans that are triggered over a period of time indebted, limits on the amount of loan dependent on the amount of income you have and lastly the limit on the number of times you can take a new loan over a particular period of time.
Another avenue that has not been given enough attention is the world of online payday lending. Although online payday lenders make up only a minority of the amount of loans worldwide, it has been observed that they are rising and within a few years, will overtake the store front volume. Variations on the loan structure such as online payday installment loans and more open-ended lines of credit are becoming more common. In the online method, a borrower completes the entire procedure online and all the authorization is done online for the lender to debit his account at the time of loan repayment.
In the field of online payday lending, all the instructions are meant to be displayed in a clear and transparent manner in order to ensure that all the terms and conditions of loans are communicated properly. If the online loan is set to roll over automatically, the borrower must contact the lender a few days before the electronic withdrawal is mainly to communicate that they wish to pay the loan in full.
For more information go homepage: www.bfwggrants.org.uk
