Cashfloat advises borrowers to use regulated lenders, check affordability, and understand costs to stay safe when seeking short-term loans for financial emergencies
-- Almost every household will, at some point, encounter unexpected financial pressure.
Even the most carefully balanced budgets can't always stretch to manage financial emergencies, and, for the 16% of adults with no savings, this is where regulated, safe borrowing may be an option.
Cashfloat, one of the market-leading direct lenders, shares guidance for those facing a financial headache right before Christmas, as part of the firm's mission to protect consumers from the unfortunately large number of fraudulent and unregulated lenders that target vulnerable borrowers.
The Importance of Ensuring Borrowing Repayments Are Affordable
Affordability is often a word those looking for a quick loan can perceive as unwelcome. That could be because they've been rejected after an affordability assessment or already know that previous credit issues will show up during an affordability check.
However, it’s actually one of the most important aspects of short-term borrowing, because you must know what your repayments will be, when they will fall due, how the total repayable has been calculated, and what interest rate you’re being charged.
That means having a clear plan that sets out what you will need to repay each month, and by what date, making sure you'll have the income to meet those commitments or can realistically cut back on other non-essential spending.
Short-term loans typically carry higher interest rates than you’d pay on a longer-term financing agreement, such as a loan secured against a car, or a mortgage, because the repayments continue for much longer, and are protected by an asset the lender can seize if the debt isn’t repaid.
You must understand what interest rate you'll be paying, and what this equates to in real terms, especially if you're debating repayment schedules.
Selecting a longer repayment period, such as six months rather than three, might appear cheaper because the monthly repayments will be lower, and could be more feasible if you'd struggle to repay the debt any faster. The downside is that the overall amount you repay will likely be higher.
How to Check Whether a Lender is Regulated and Credible
Responsible lenders will, wherever possible, want to provide you with the borrowing you need, but they must ask questions to ensure they’re not extending financing to someone who cannot afford the repayments, or is taking on more and more debt without seeking help.
For example, it is never advisable to borrow more to pay off other loans, to apply for a loan if you’re already using credit to cover everyday essentials, or if you have any doubt whatsoever about whether you’ll be able to keep up with the repayments.
Late payments can have serious, long-term repercussions, and if you already have a low credit score, this will only compound the matter.
This is why anyone looking to apply for a loan should check that any lender they choose is fully compliant with all of the lending regulations that apply here in the UK, and that they can rely on for genuine advice if their circumstances change.
One of the easiest ways to do this is to find the company’s Financial Conduct Authority (FCA) registration number, which should be displayed clearly on communications or website pages, usually alongside contact information. You can then head to the FCA website and enter the company name and/or registration number to confirm they match.
It's also worth being mindful of any lender that offers ‘guaranteed approvals’ or something similar. Anything that sounds too good to be true, or a lender that exerts pressure to rush, such as accepting a loan offer against a ticking clock, or submitting your bank or card details to ‘lock in’ a favourable rate, should be avoided.
Things to Look For Before You Apply For a Short-Term Loan
Despite higher borrowing costs for emergency loans, these products are also subject to maximum caps imposed and enforced by the FCA, the regulatory body mentioned above.
A regulated provider cannot charge any more than the amount you’ve borrowed in interest. For example, a loan of £100 could carry an absolute maximum cost of £100, meaning you’d repay £200 in total or double the original borrowing. That includes interest, fees and other charges.
Checking the repayment calculator to confirm the total amount you'll have repaid by the loan end date is important, as it helps you track your repayments and the outstanding balance and ensure you're not paying more interest than you should.
We'd also suggest you review the credit checks a lender runs before applying for a loan.
This might be most relevant to borrowers with low credit scores who should disclose any meaningful aspects of their credit history at the point of application, check whether they are likely to meet the eligibility criteria and ensure they're not accumulating more credit searches when applying for loans they won’t qualify for.
There are specialist ‘bad credit’ lenders who focus on supporting applicants who would be ineligible for other conventional short-term loans or have been turned away by their bank. You’ll often be charged higher interest for the greater risk linked with these products, but you may also be able to access safe lending without worsening any credit problems you’ve already experienced.
About the company: About Cashfloat Cashfloat is one of the UK’s leading direct lenders. We provide online loans for people with all credit scores. Cashfloat is fully authorised and regulated by The Financial Conduct Authority
Contact Info:
Name: Esther Lizmi
Email: Send Email
Organization: CashFloat
Website: https://www.cashfloat.co.uk/
Release ID: 89177105
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