Cash loans came on the market in a dodgy manner. Basically, you could get anywhere between £100 and £500 on average – more or less, depending on the lender. The fees were quite high, but people with low debts or high affordability faced no issues whatsoever. Then, those who failed to pay ended up in more and more debt. In other words, a cash loan was not the best option if you failed to consider your options.
However, things have changed a little. Cash loans are now regulated. In 2016, the FCA has decided to step in. Lots of people ended up with more debt than they had initially. Fees were pretty clear, but there were hidden charges that overwhelmed them. The FCA has come up with a series of strict rules and regulations. Most of them were rigorous and hard to pass, which was excellent for the consumer.
These days, most lenders are regulated and have to follow a code of conduct. From this point of view, it is critical to make sure your lender has a valid license and is thoroughly regulated by the FCA. When it comes to the rules, what are the most important ones to be aware of?
Interest Rate Limits
Interest rates used to be pretty high a decade ago, but things have changed since the FCA has stepped in. These days, lenders are limited. They can only add 0.8% a day. In other words, if you borrow £100 for a couple of days, the interest rate cannot exceed £1.16 for this time frame. Some lenders rely on lower rates to attract customers. Obviously, it depends on how much time you need to repay the loan.
Back before the FCA regulations, interest rates were the most annoying factors in the process. Customers were forced to pay a fortune in order to overcome their emergency debts and many of them ended with even more trouble.
Penalty Fees Regulations
Penalty fees applied for consumers breaking the agreement. You had to make a payment on the third of each month. You missed it, you got charged. These fees could be quite problematic. If you let them add up, they could have overwhelmed you. Things are much better now.
A fee or a default issue cannot exceed £15. If you end up defaulting, the lender can keep charging interest. However, the rate will not change. It will stay at the exact same rate as when the loan started. There will be no changes.
No Doubling Up
Some people used to get £100 or £500, only to end up paying more than double back. The interest rate was pretty high. Then, there were fees and lots of charges, which could easily skyrocket the repayment plan. These days, the FCA has agreed that any charges and interest rates cannot exceed the initial amount.
Simply put, if you take out £500, you will never have to pay more than £500 in default fees, charges, taxes and interest rates. You know for a fact that this is the maximum limit your fees can go up to – just in case you actually end up struggling to repay.
These new rules implemented by the Financial Conduct Authority have cleared out the scum and made room for genuine lenders. These days, chances to get ripped are close to nor. If a lender is not registered with the FCA, its operations are illegal. This is the main reason wherefore you must ensure that you borrow money from regulated credit providers only. Sure, you may find better rates here and there, but this should be your main priority.