What Online Lenders Offer?

Online lenders have been known by quite a few different names over the years, whether that be as payday loans, short term loans and more recently installment loans. All of these names actually relate to the same type of borrowing and that’s one of the ‘short term, high cost’ variety. Online loans have very much become an established borrowing choice amongst consumers, with many millions of us using them in the decade or so they have been available. What some of us will not be aware of is the fact that online loans have recently undergone some very big changes and as such are a much more varied and flexible borrowing option. Given that for many years several big names seemingly dominated the market, consumers understandably came to understand that this market housed only one very specific type of borrowing and for many years; this was in fact true. But in recent years and under the guidance of new regulators, the online loans and their lenders who offer them have been transformed.

Online Lender

Whereas nowadays the majority of lenders within the online loans market offer flexible choices for borrowing, this was not always the case. In the early year’s lenders focused their efforts on lending a resource which meant the loan was repaid over a short period of time. This time period was reflective of the applicants next employment pay date which meant that loan terms ranged from a week to a month but usually no longer. This single repayment style of borrowing quickly became known as the payday loan and for many years it was the only product which was readily available within this particular sector. These loans allowed customers the opportunity to borrow anything between £100.00 and £500.00 normally and if successful, the customer would have to repay the entire loan amount and the interest charged by the lender on the agreed repayment date; being their pay date. Over the years it did however become increasingly clear that the payday loan style of borrowing was not, in a general sense, flexible enough to support the realistic needs of the consumers using them. It is fundamentally this fact alone which led the market to transform and subsequently exist as it does in today’s form.

Under new regulators and after several years research it became obvious that online loans needed to change and to do so quickly in order to improve the resources available to consumers and in doing so, improve the general opinion and feeling which surrounded this market. The end result is a market which is now built entirely around the needs of consumers. So in real terms this means more flexible borrowing options and more customer friendly lenders. The loans on offer today are typically based on installment borrowing which means consumers do not have to borrow and agree to repay in a lump sum if they do not wish to do so. The new regulator, the Financial Conduct Authority has guided its lenders to better practices throughout the application process and furthermore the relationship which then unfolds between them and their customers. With the addition of installment loans, which allow customers to borrow over a range of different months, as well as control in terms of interest which can be charged, the Financial Conduct Authority have helped restore trust and order to the online loans market.

As a consumer looking to borrow from this market then, what changes can we expect to see? One of the clear changes is the manner in which borrowing is offered, which as discussed above is now generally speaking via installments. The application process has changed too, with lenders being more aware and therefore focused on considering the affordability of their applicants. Budget information must now be provided as part of the application and as potential customers we have a responsibility to provide this in an accurate and honest manner. The lenders later use this information to make sensible and information driven lending decisions. The speed of approval is no longer promoted as a key selling point of such loans, to further educate customers that lending decisions are made based on facts not on being the quickest. As well as all these things lenders are going to greater lengths to keep their customers fully informed and therefore up to date as their application and subsequent loan progresses. Information is being better displayed, is clearer and as such, makes the process of applying much less confusing. As a new chapter now starts for online loans, it will be interesting to see where they go next.