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What Your Short Term Loan Company Doesn’t Want You To Know

When it comes to short term loan companies, we all hope that they are going to be as transparent as possible. It doesn’t matter if they are offering short term loans, payday loans or any other form of loan, every loan company has some things that they would rather that you didn’t know about.

So, what are the things that these short term loan and other loan companies simply don’t want you to know? Let’s take a look at some of them.

Hidden penalties and small print

As we have already covered, we all hope that short term loan companies, particularly those that offer up payday loans are transparent in all the terms and conditions that come with their lending. However, the truth is that when it comes to these types of loans, there are often hidden penalties that you may not, or small print that you simply do not notice. It is vital that you ensure that you check the small print for any loan agreement that you are entering in, making sure that there are not going to be any hidden penalties that you had not accounted for, or perhaps that could spring out of no-where. This includes early repayment fees, fees for chasing late payments or perhaps even fees for simply taking out the loan in the first place.

Hidden APR and their different rates

APR is a term that many people will hear of when it comes to taking out short term loans or payday loans. But what exactly does it mean and how can it be hidden? APR stands for Annual Percentage Rate and is the amount of interest that is added to the total amount that you owe, as well as any other fees that you may need to pay. APR is calculated every year, before being split over 12 months which will form your monthly payments.

The thing to remember about APR is that you may see a particular offer advertised by a loan provider, however, when you come to apply for the loan, you do not receive the same APR. This means that you will end up paying more than you expected and even hinder your chances of paying them back every month. Exact APR is different to Representative APR and this is something that you should look out for when checking out APR rates.

For your information the FCA has set a cap on the market interest payable for short term loans at 0.8% per day.

The power of a comparison sites

We have all heard about comparison sites and how they can help us to save money across a variety of aspects of our lives. However, we still underestimate the power of comparison sites, particularly when it comes to saving us money for loans and other borrowing. Comparison sites such as Money Supermarket are designed to help you to take a look at the different loans out there and make sure that you are not only getting the best interest rate, but also the best terms and conditions to your loan too.

The importance of shopping around for short term loan

We have already taken a look at whey comparison sites, however, it is all too easy to forget that as well as looking at them, you need to give yourself the chance to shop around. Loan companies rely on the fact that you are likely to need to borrow in a rush, which means that you don’t have time to shop around, however, you should always make sure that you don’t rush this all important decision. Shopping around means that you can save yourself some money in the long term and that your borrowing is going to help you to avoid any problems in the future. If you want to make sure that shopping around is as easy as possible then you may want to take a look at websites such as Compare the Market.

They are relying on you being loyal and not shopping around

Loans, particular short term loans are a competitive and crowded market, therefore, any lenders that offer short term loans are going to want to ensure that you are loyal to them and that you do not shop around. This means that they are likely to offer up deals and benefits if you sign up to them straight away, but it also means that if you make it look like you are considering other loan providers, then they may want to do things to encourage you to stay with them.

Understanding the importance of FCA and what are your rights

If you organise any lending such as short term loans then you may have heard of the FCA. The Financial Conduct Authority are there to protect borrowers and ensure that lenders treat you fairly and act within the regulations. Whilst you may not have time to read through all of the guidelines and contents of what the FCA do, it is important to ensure that you understand the basics of how the FCA are there to protect you and the rights that they have given you as a borrower. A great way to do this, is to have a look at the basics of what they do, this can be found online and gives you the chance to understand more about where you stand if you are a borrower.

What is the new legislation and how does it work in practice?

Back in 2017, the FCA decided that the time had come to ensure that those offering short term loans and payday loans were acting in a way that was transparent and that was ensuring that the borrowers were treated fairly. The idea from these legislations included allowing borrowers the chance to compare loans easily, by ensuring that they provide a link to a comparison site, where they can check whether or not they are receiving the very best deal. Short term loan companies are also expected to give clear and concise explanations on the fees or charges that they will be expected to pay, especially when it comes to missing repayments. These fees are also capped at £15 and borrowers are to pay no more than 0.8% of the amount borrowed per day.

These things have helped to not only make the short term loan business cleaner and fairer, but have also ensured that those lenders within it are receiving fewer complaints about the way that they operate.

Credit checks and your credit record

Have you ever taken the time to look over your credit record? Probably not, and this is definitely something that loan companies rely on for those who may be applying to borrow from them. The thing that you have to remember about your credit score and credit checks that are made out in your name is that the credit score that you have, is going to affect not only whether or not you will be approved for a loan, but also the interest rates that you pay. It may even mean that you have more fees to pay then you would if had a higher credit score.

Your credit can be affected by a number of things. You could find that the amount of debt that you have had is on there, as well as whether or not you have been timely with your payments. A credit record will also look at whether or not you have fallen behind with payments, or whether you have gone over any limits set on borrowing accounts, such as credit cards.
This all comes together to create a credit score, which then shows the lender what type of risk you pose if they were to lend you money. This risk determines the rate that you are going to pay on the amount that you borrow.

It is important that you are aware of your own credit record, especially since there could be mistakes on there which need to be rectified, and only you can do this. If you want to make sure that your credit record is what it should be, as well as have a look at your credit score, we recommend that you take a look at Clearscore .

Clearscore is completely free and it allows you to not only monitor your credit score and check that everything is as it should be, but also highlight any issues or mistakes that could be on your report.

As you can see, there are plenty of things that short term loan companies would really rather borrowers didn’t know. Particularly as some of these things may make you think twice about where you get your borrowing from and how you borrow in the future too.

Check out the short term loan rates on offer at Fernovo – and don’t forget to check our rates against the competition!

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