New Products In Payday Loans To Circumvent Regulatory Implications

By Author: Broad Stevens
Total Articles: 40

The rules are stringent and to avoid the backlash from regulators, the providers of payday installment loan services are switching their product to long-term instalment loans which are enabling these lenders to fall outside the grasp of the regulator. This has reduced the dedicated scrutiny for the first time in UK. There are divergent views on the regulatory impositions and the school of thoughts from consumer groups.
The consumer groups carry a view that the instalment loan and the installment payday loans UK carry the same rates of interest and have similar exposure to risks. These two aspects were of prime concern forcing the regulators to keep an eye on the transactions in the interest of the consumers. However, the stakeholders have applauded the companies which have switched to new products from the traditional payday installment loan services. This move is especially advantageous since these service providers are diversifying their income sources while also reducing the risks of regulatory forces. The regulators feel that the lending and borrowing should be regulated irrespective of the length of whether the transaction period is 14 days or 180 days, whether it is a payday loan or instalment loan. Having said this, there is no stopping to come up with better products to help the struggling employees by addressing the issues of debt trap and outdated- payday loan lending mechanism.
The new age products have enabled the installment payday loans UK to compete on equivalent footing with the banks and financial institutions that have been focussing on the instalment loans only.
It is also pertinent to mention the flip side of the instalment pay day loans as the consumers are subjected to high risk in the form of interest rate. The repayment is secured by way of post-dated cheques authorising the lenders to benefit from direct debit from the borrower’s bank account. For every 100 Euros borrowed, requires a repayment of not less than 120 Euros which is inclusive of the service charges and interest. This kind of product is meant to enable borrower to tide over the cash crunch until the next payday. And the borrowers sometimes get into the vicious circle of debts leading to interest payment of 521 percent on annual basis. There are many borrowers who roll over and borrow for atleast 10 months in a year. The regulators therefore, have proposed to restrict such borrowing and insisted on a waiting period between two consecutive borrowings. The advantageous part in installment payday loans UK is that unlike instalment loans, the borrowers are not subjected to income verification and credit checks.
Broad Stevens is author of this article. For further details about payday installment loan services and installment payday loans UK please visit the website.