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A lot of people in the UK are hesitant about taking out a payday loan because they incorrectly assume that there aren’t any regulations in place for them. The fact is that there are quite a few rules for private lenders who give out these loans. It is important for you to learn about these rules before making a decision. Taking out a payday loan is actually quite safe, especially when you consider the heavy regulations that are currently in place.
Rollover Limits
Those who can’t afford to pay back the payday loan they take on can typically roll it over into the next month. While this can seem like a good thing, you will most likely have to pay additional fees and interest. This is why it is so important to repay your loan on time. The new FCA rules stipulate that you can only roll over the loan you take out two times.
This is actually a really good thing, as it keeps you from getting too deep into debt. It is a rule that sort of protects you from yourself. Before you take out a payday loan, you should always crunch the numbers to see if you can afford to pay it back by the due date.
Payday Lenders Cannot Collect More Than Two Times
A majority of payday loan lenders use a CPA or Continuous Payment Authority get payment from their borrowers. This essentially gives them the ability to extract funds from your checking account for any amount at any time. A reputable lender will let you know how much they are going to take and when it will happen. You should keep this in mind when trying to choose the right one to borrow from.
CPAs can actually be helpful when you are taking out a payday loan, as you won’t have to worry about forgetting to pay it back. It greatly reduces your chances of defaulting on the loan you have taken out, which can really hurt your credit.
The recent FCA rules clearly state that these lenders cannot keep trying to take money out of your account after two failed attempts. Instead they are required to get in touch with you to get an explanation. This new rule can really help you save a lot of money on your loan.
Limits on Collection Amounts
There are also rules about the amounts that lenders are able to collect with a CPA. A lender can also take money out of your account in this way if you have enough funds to cover the entirety of the loan. This means that they cannot just take out a partial payment. You can still make smaller payments to pay off your debt, but you need to give permission for more to be taken out of your account.
Risk Warning
Every single payday lender is now required to display a warning stating that late repayments can lead to serious financial problems. They will also direct you to a website where you can get help. This warning needs to be displayed on all electronic communications and non-electronic media as well.
Help With Your Debt
Any legitimate payday lenders will give you helpful information for getting out of debt prior to rolling over your loan, as they are required to do so by the FCA. This information could provide you with the assistance you need to financially regain your financial freedom. Before this law went into effect, very few borrowers would get this helpful information.
Future Regulations
There will most likely be future legislation passed to ensure that payday lenders are even more truthful in their dealings with borrowers. There are currently a number of proposed laws that would make it illegal for payday lenders to give loans to those who cannot afford them. These laws will make it even safer to get one of these loans.
Are Payday Loans Safe?
Despite what many people might have you believe about payday loans, they are perfectly safe. It is, however, important that you are responsible and pay back your loan on time. You should determine ahead of time if you can afford the loan. It is also a good idea to make certain that you are financially stable enough to repay your loan on time. While there are rules in place to help keep you out of debt, you need to be responsible as well.
Those who believe that payday loans are unsafe because of a lack of regulation just don’t understand the facts. It is crucial that you take the time to read through these rules so that you will have peace of mind when going forward. A payday loan can really help you out when you are in a bad financial situation.