Short Term Loan History

1. Short Term Loan History

2. When it comes to short term loans and any form of borrowing it is important to ensure the resource selected is genuinely affordable. In the modern day market place for short term loans the lenders who exist are more focused on responsible lending then has ever been the case before and as such the loans being offered are designed around this principle. As such customers considering short term loans for their short term borrowing needs now also need to take accountability for borrowing in a manner which is sensible and realistic. In the past short term loans were considered to be a ‘last resort’ for many consumers, who in reality, were already struggling financially. As a result of this the limited selection of lending resources offered by the vast number of lenders available meant that many consumers were placed in a position of increased and costly debt.

4. Over the years short term loans have evolved in a number of ways thanks to the introduction of the Financial Conduct Authority as the regulating body responsible for the operations of the short term loans market as a whole. The Financial Conduct Authority or FCA as they are commonly known, took time to perform a detailed and in-depth review of the market to see where improvements to this difficult market place could be made. Through their extensive research it became evident that the short term loans on offer were not realistically able to meet the needs of their customers and as such, were not lending in a responsible manner. The FCA’s findings meant that in more recent times the short term loans market has adjusted not only their entire approach to lending but also the way in which loans are lent to customers.

6. What the FCA uncovered was two-fold, firstly they concluded that the product being offered was too expensive and not suitable in the majority of cases. Secondly it became evident that lenders were not accurately and realistically assessing their applicants to ensure the loans being granted were affordable. With the support and guidance of the FCA the way in which the short term loans market operates has now changed. In the past the vast majority of lenders operated a lending resource based on the understanding that if approved, the customer would repay the entire sum as a single and lump sum repayment. In instances where the customer was not able to do so, they were instead offered the ability to repay an interest based repayment, typically known as an extension, to delay the single repayment for a month. Nowadays short term loans are considered more flexible because lenders offer repayment terms designed to be repaid over a number of instalments, should the customer wish to do so and if financially, it is more suitable for the applicant also. This means short term loans can be split into repayments over 2, 3, 4 or 5 months, with a host of other terms also being made available. The approval process is also designed to better understand the customers’ existing finances and how a new loan would exist alongside this.

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