At the Lenders List we know that the terminology may be confusing when looking for a payday loan or instalment loan so we have designed an A to Z guide that will help you better understand what the lenders are talking about.
APR / Annual Percentage Rate
Often one of the most important factors to consider when taking out a loan for any amount, the annual percentage rate (APR) is referred to the percentage of interest which is charged against your loan each year. This takes the loan value into account from the start of the loan to the end period. When looking at taking a loan for any amount, it’s always best to use this to compare loans from one company to another. Most sites including The Lenders List will display an illustrative example.
Cooling Off Period
Payday Loan providers must allow a cooling off period, be sure to check with each lender as the cooling off period may vary with each payday lender, most borrowers can cancel their loan and repay the loan balance without paying any penalty charge. Notice of this may also vary from contacting the lender via telephone or writing to the lender to cancel your agreement post receiving the loan.
County Court Judgments
At the end of the day, the payday loan companies need to protect themselves in order to do this most lender will use legal methods to ensure that the repayment that is a part of the agreement between the borrower and lender is made as agreed. If the agreed repayment is unable to be paid you may face a CCJ which will charge you with the outstanding amount owed and will give you a month notice to repay the full amount. If this payment is not paid within a month your CCJ will be registered with the county court judgements and credit reference agencies who will note your credit file with this information. We always recommend contacting the lenders as soon as possible if you are not able to make a payment on time as they may have some flexibility and be able to help yourself.
Credit is essentially the term that describes the lending of money from a lender or payday company, If you apply for a payday loan you are effectively applying for a credit for the loan amount
The document and terms that are agreed between both payday lender and borrower, under which the payday loan is arranged and on the terms that lender states. This document which may be provided in various formats from online to paper copy will contain key information about your payday loan credit, your personal data and repayment information.
Credit scores is a system for payday lenders to use to help them decide whether they can provide you with a loan, the information that you provide when applying for a loan about yourself such as age, occupation, marital status, and your financial history is used to calculate a score. This score is used to statistically compare yourself with consumers with a similar profile.
This is then used to evaluate the risk to themselves for lending the amount of money requested by the borrower; a pass mark may vary from lender to lender depending on various factors which are never made publicly. If you have applied for a payday loan and didn’t pass it may be worth considering a guarantor loan as these types of lenders, work slightly differently and consider the credit score of both borrower and guarantor. Please note that not all decisions are purely based on computerised system and often they are made by a human being who can use their own judgement with the end decision.
Credit search is a term which is often used in the payday industry, this is a search that is carried out by lenders with a credit reference agency’s (Usually Equifax / Credit Expert) in order to assess your credit history. Payday lenders will use this information to see if you have a proven track record of being able to repay credit that’s been issued in the past and paid back on time as part of the agreement between payday lender and borrower
Direct Debit / Direct Debit Mandate
A form of method widely used to pay back money in a safe and quick way, you will often have to set up a direct debit to pay back instalments of your loan directly from your bank account. Once you have had your loan amount accepted and processed you will need to provide your payday lender with a mandate to grant permission to set up a direct debit for the amount set out in your agreement.
E-Signatures & Online Applications
Lenders are constantly looking to improve their process with the aim to speed up the whole application process, payday loans will often be able to process the loan application and transfer the money on the same day. The reason for this is that unlike in the past where physical paperwork had to be sent off and signed by the borrower, this can now be done online and electronically.
Financial Ombudsman Service
The Financial Ombudsman Service is a free public service provided by the Government had has been set up by the financial regulator, the Financial Services Authority (FSA). The Financial Ombudsman Service provides advice if you have a complaint about any financial product or service that has been provided to yourself by a lender. As a general rule, we always recommend trying to resolve any disputes directly with your lender, but if after you are unable to get this resolved you may then pass on the complaint to the Financial Ombudsman Service, who will deal with your complaint impartially.
Late Payment and Charges
If you are unable to make a repayment on time as agreed with the lender when first applying for the loan / credit you may be faced with a late payment charge. Lenders will send you a reminder letter or contact yourself to let you know that you have missed a payment. You should always try to contact the payday lender and let them know if you have any reason which may have been out of your control i.e family emergency, critical illness or involuntary unemployment.
Your Loan agreement is referred to the formal contract and agreement between the lender and borrower which states the terms of the loan, this will include the repayment period, APR and the loan amount. The agreement forms the contract that you agree to the terms and condition that accept when taking the loan.
When requesting a loan from a lender your application is usually the first contact with the lending company, your application will be used to gather details about yourself, the credit amount of which you would like to borrow. Once this has been looked at the lender will issue you with a credit agreement form. As a part of the application, various checks may be required including a credit search with the credit reference agencies. This will be used to make a decision on our application.
Loan Term and Loan Period
The loan term or period is the amount of time that you agree to pay back the amount you have borrowed. The term/period will stipulate the start date of your loan to the end date of your loan. This is used to form your credit agreement and will influence the total amount that’s paid back.
Once your loan application has been accepted and you agree to the loan you will be liable to make the repayments back on time as per your loan agreement on a monthly basis. A direct debit mandate will be set up to make the repayments back from your bank account for your loan amount. These payments will stop once your loan has been completely repaid.