CAB calls for tighter regulations on no credit check loans

The Citizens Advice Bureau has recently entreated the Government to place tighter regulations on no credit check loans due to fears that too many consumers are slipping rapidly into unmanageable levels of debt.

Also called short term loans, these instant cash loans can be quite handy in the short term for those who are in need for small amounts of cash to help meet expenses before their next payday.  However, CAB recently told reporters from the BBC that they were alarmed by the growth of these loans, leading to soaring debt, and have decided to ask ministers to intervene in the form of regulations designed to protect consumers.

Payday loans differ from more traditional lending in that you don’t need to take years and years to repay borrowed cash.  Instead, these loans are meant to be paid back once the next payday of the borrower rolls around.

There are many benefits to short term loans that are managed well, such as providing access to short-term credit, not to mention that many short term loans are less costly than using an unauthorised overdraft, provided the instant cash loan is paid back promptly.  However, if the borrower neglects to pay back the loan on the date specified, debts can quite quickly get out of hand, since interest rates on these loans are much more expensive than you would find on a traditional personal loan.

The CAB says that, over the past two years, the number of people have fallen into debt because they have neglected to pay back an instant cash loan promptly has grown by a factor of four.

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