Do borrowers have the required information available to make an informed decision on lending?

 

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The Independent Online

Borrowing money is not a decision which should be taken lightly: this is a theme that has taken centre stage ever since the furore surrounding payday loans emerged a few years ago. Although the responsibility of a loan should always fall with the borrower, many questions have been asked about whether or not these customers are always given all the information they need to make a fully educated and informed decision about their payday loan. Since then, many of the “cowboy” or dubious lenders have been replaced with responsible and transparent short-term loan outfits such as Satsuma Loans. However questions still remain as to whether or not customers are being given all the information they need.

Underhand advertising

The very nature of short-term loans has led companies to use aggressive tactics in order to get consumers to obtain a quote. APR rates and balances had been dressed up in a way which misled the customer and not included things such as late payments fees, early repayment fees etc. Part of the overhaul of the sector has seen the new, more transparent lenders show examples far more prominently; whether this be on their websites or email marketing channels. As long as people looking for a short-term loan are using a reputable lender, then they should be able to find all the financial information they need to make an informed decision regarding their cash advance.

APR rates

As part of the investigation into the payday loan market, bodies such as the CMA (who have helped with the respected investigation into the broken energy sector) and Ofcom established that customers didn’t actually understand what many of the facts and figures they are presented with actually mean. Again, although any financial decision should not be taken lightly by any consumer and the onus should be on them to understand their products, it was recommended that lenders should do more to ensure potential borrowers actually understood the commitment they were making.

Payday lender health check

The market, although cleaned up considerably compared with a few years ago, is still interspersed with some dodgy outfits which could well leave the consumer reeling with unfair interest rates and charges and spiralling into more debt. The challenge then is separating the wheat from the chaff and finding a short-term finance solution that is value for money and offers good customer service.

There are a number of ways someone can establish this and the best ones are:

  • Does the lender’s website look credible?

  • Are there reviews and testimonials present?

  • Are interest rates and late payment fees clear to see?

  • Does the website contain resources, FAQs and an about us section?

  • Is it easy to get in touch with a UK call centre?

The above does not guarantee a lender is reputable and ethical, but can be a way of building trust with a brand. Consumers can always contact the Money Advice Service if they have any question regarding their finances or indeed, short-term borrowing.

Resources and information

Finally, the last issue surrounding borrowers making an informed decision regarding their lending is that of resources. Any lender which is confident it offers a fair, clear and impartial service can prove that by providing clear information to the customer, either through their site or via the emailing of literature.

Summary

In conclusion, short-term or payday loan customers do have the required information available to make an informed decision regarding their loan, provided they do their research and ultimately use a reputable lender. As with all industries, there are dubious firms operating in a way that is far from ideal and borrowers need to be aware of these. By following the guidelines in this article, borrowers can use a short-term loan to good effect.