Managing your finances is hard going, especially when you’re hit with all sorts of emergencies at the same time. Sometimes, it can be tricky scraping together the cash that you need to solve the issues as well, so you may need to look for some extra support. One way to do this is to look at payday loans in the UK. A lot of people like to make use of these when they’re going through a rough patch as they allow you to borrow from your wages in advance. However, there are some rules surrounding payday loans that you need to be aware of, as they’re in a place to ensure you’re protected as a customer. So, keep reading and learn all about the rules around payday loans.
What Are The Rules Around Payday Loans
Authorisation
For a payday loan lender to be able to provide money to customers, they have to be authorised by the Financial Conduct Authority (FCA). This process ensures that the new lender is actually going to be legitimate and has customers’ best interests at heart. The authorisation process can include things like background checks on the directors, looking into their data processing and protection, and even their training in compliance. This is to make sure that the lender is going to provide people with an accurate, reliable service, not one that’s just going to take their money and put them into debt.
Total Repayable Amount
When you take out any type of loan, there will always be a total repayable amount. This will be different from the amount that you’ve borrowed, as it will have added interest. However, the payday loan lender must make it clear to you how much you’ll have to repay in total. They need to show you a breakdown of the cost and how it’s been calculated. This way, you’re not hit with a nasty surprise when it comes to paying it off. There is also a price cap on payday loans of 0.8% per day. This prevents the added interest and fees from getting too high and unmanageable for the customers. So, be sure to take note of your charges and make sure they aren’t going over the price cap.
How To Pay Back The Loan
The lender must also provide you with accurate information on how you can repay your payday loan. They also need to tell you when it has to be paid by too, so that you’re able to meet the agreed terms. Any payday loan lender must inform you if they’re going to take money from your account using the continuous payment authority (CPA) as well. They’ll need to inform you when and how much they’re going to be taking beforehand so that you can ensure you have the money in there to cover the payment. You also have rights when it comes to cancelling a CPA, so make sure that the lender goes over these with you as well.
Incorrect Approval
When you apply for a payday loan, you’ll be asked to complete an application form to determine whether or not you’re a good candidate for the loan. However, if the lender doesn’t accurately check your financial situation or personal circumstances, then they’ll be going against the rules of lending. They need to make sure that you’re able to cope with the loan and won’t be putting yourself into a worse situation. The lender also has to tell you that payday loans aren’t to be used for more long term borrowing of money. Instead, they’re only used for a short period of time in emergencies. So, make sure that when the lender takes on your application that they take all of this into account and inform you of the short term purpose of the loan too.
Price Comparison Sites
One unique rule that payday loan lenders have to adhere to is ensuring they’re listed on price comparison sites. They then have to display this information on their own site to ensure that customers are aware of this. This then allows customers to click onto the price comparison site and make sure that they’re getting the best deal that they can. So, if you don’t see the payday lender listing themselves on any price comparison sites, they’re most likely going to be breaking other rules too.
Charges
As with most loans, there can be late charges if you’re unable to make a repayment. However, the lender must inform you of the risk of not paying your agreed amount before they can charge you any sort of extra fee. This could be in the form of an online advert or even an email, but they must do it. Every single payday loan advert has to have this in them, so if they don’t, you’ll want to steer clear of the lender. When it comes to interest rates and other charges, there are set amounts of what they can and can’t charge from the FCA. If they do charge you more than is allowed, you need to contest this and take it further, as it’s against the rules of the FCA.
As you can see, there are lots of rule around payday loans, and they’re all equally as important. These rules keep your protected as a customer and ensure that you’re not taken advantage of when you’re at your most vulnerable. So, make sure you take these tips on board when you’re looking into taking out a payday loan, and you should have a much better experience.
