Payday Loans in their Modern Form

For many years now payday loans have been thought of as a very specific and somewhat limited method of borrowing a small sum of money. Payday loans were first made available back in the early 90’s so it’s not surprising that the reality is, a lot has actually changed to both the product being offered as well as the lenders who operate. Unfortunately, over time a somewhat negative image of the payday loans market grew and as this snow balled the public’s opinion of this market hit rock bottom. The great news is however it that so much has changed in recent times for this market that those who once considered it to be limited and unable to serve the true needs of customers, would likely be surprised at its modern day form. Today we will be looking at the changes which have taken place and why they were so needed.

Payday Loans Form

Payday Loans Form

When we think of a payday loan most of us think of a small loan which demands a on-off repayment to clear the loan on our next employment pay date. The loans are usually in the hundreds rather than thousands and this means if we wanted to borrow a payday loan for say, £300.00, we can expect a sizable amount to be due for repayment when we next receive our wages. This description is without a doubt, the classic payday loan. The classic payday loan existed in this simple and easy to understand format successfully for many years. In the early days this simple manner for borrowing was welcomed by customers given the fact it was completely new. Before payday loans the ability to borrow only a few hundred pounds, was pretty much non-existent. So why then, is it that over the years the payday loans developed such a poor image?

In clear terms the reason why the classic payday loan fell out of favor was simple; the repayment manner was simply too limited. Over the years, consumers demonstrated that although the ability to borrow a small sum of money was useful, having to repay it as what was often a sizable lump sum was for the majority not realistically affordable. This meant that customers of such loans constantly struggled to honor the agreement set out to them and furthermore turned to the lender for other repayment options. What followed was many years of high interest, charges, defaults and the breeding ground for negative feeling towards this once popular consumer resource.

Thankfully the great news for consumers nowadays is that the payday loans market has been completely transformed. First and foremost, the regulator responsible for the operations of payday loans lenders has changed to the Financial Conduct Authority, who now governs the entire market. Through the hard work of the FCA (Financial Conduct Authority) and the lenders who truly wished to support consumers, new rules and guidelines have all but done away with the somewhat dated payday loans. Instead in today’s market there are more customer friendly borrowing solutions, based around interest capped installment loans.


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