Most payday lenders operate under compulsory code of practice

John Lamidey, the chief executive of the Consumer Finance Association explained recently that there was a lot of confusion concerning the benefits and costs of short term loans.

Providing they are repaid on time, short-term loans can be a useful way of satisfying immediate financial needs. The CFA has now put together a list of the ten most common myths surrounding short term loans.

We are always being warned that short term loans are more expensive than credit cards and bank overdrafts. According to the CFA, this is a myth. As an example, the Association says that a £200 instant cash loan, repaid on day 30, could be obtained for £250. An unauthorised bank overdraft for the same amount could cost £350 over the 30-day period.

Another common myth surrounds credit checks. The CFA says that more than 90% of people applying for online loans are refused after credit checks have been conducted. Furthermore, credit checking is an essential element of responsible lending and business that ignores it is likely to be hit with fraudulent applications and end up going out of business very quickly.

7 out of every 10 short term loans in the UK are granted by members of the CFA and they operate to a compulsory code of practice. However, Mr Lamidey pointed out that not all short-term lenders have the same high standards. He advises consumers to make sure they understand the cost and terms of their loan and to try a different lender if they are in any way concerned.

 

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