The payday loan market has changed substantially in recent years. These days, lenders are much more reliable and thanks to changes in legislation the loans are much more affordable too. However, it hasn’t always been like this. Here we’ll look at how payday loans began and how the market has improved to what it is today.
How it used to be
It wasn’t that long ago that the payday loan industry prayed on the most vulnerable. As the popularity of payday loans increased to astronomical levels, hundreds of illegal lenders started to appear on the market. These have since shut down after a crackdown on the industry.
Before the new regulations were introduced, lenders could charge practically any interest rate they desired. This led to huge, unaffordable rates being charged to those who could least afford it; causing many to fall into an unprecedented level of debt.
There also weren’t any real restrictions on who could borrow money. In fact, one of the biggest attractions of payday loans was the ability to get one without a credit check. So, those who had been turned down or unable to get a loan through more reliable channels, could get accepted by a payday loan lender at ridiculously high interest rates.
The number of people getting into serious financial trouble because of these loans was high. This is what spurred the FCA (Financial Conduct Authority), to step in an better regulate the industry.
How it is now
Several significant changes have been made to the payday loan industry, including:
(Research cross-referenced using Smart Pig as an exemplary loan provider.)
These changes have seen really positive results. The Citizens Advice Bureau has reported a drastic reduction in the number of people experiencing financial pr... because of payday loans.
There has also been a huge drop in illegal lenders, with hundreds closing their doors after the crackdown. Now, borrowers can rest assured that the majority of lenders which are still operating are reliable and regulated.
Overall, the payday loan market has changed drastically over the years. The negative reputation they once had has now been significantly improved thanks to stricter regulations. It has made it more difficult for those who are vulnerable, to get the finance they need. However, mostly the changes have had a positive effect on the industry.