Technology has infiltrated nearly every business industry over the years, with its development having a major impact on sectors like finance and economics.
According to the Bank of England, UK citizens hold an average debt of over £30, 000 per person, with millions of people taking out loans to cover their expenses. The emergence of online lending has been fueled by the tech industry, with devices like smartphones and laptops enabling virtual applications.
Quick payday loans online have gained popularity in recent years, with the emergence of hundreds of lending apps and websites. The Consumer Finance Association (CFA) represents the interests of major short term lenders in the UK, while the interests of borrowers are overseen by the Financial Conduct Authority (FCA). The two organisations work together in an effort to ensure that online lenders don’t have free reign over the market.
What are payday loans?
Payday loans are short term loans that are taken out against a borrower’s paycheck. They’re a great option for emergencies, and represent a reliable solution for people with bad credit. UK residents over the age of 18 simply have to present valid proof of income to qualify for a payday loan.
The continued influence of technology in the finance industry has led to the emergence of numerous online lenders in the market. Reports indicate that over 80% of people in the UK apply for loans online. The payday loan industry is valued at billions of pounds, with over ten million loans taken out in the country each year.
Online Lending and Technology
Over 80% of adults in the UK own a smartphone, making it one of the primary devices for communication and sourcing information. 96% of UK households also have internet access, with millions of people fulfilling numerous needs online.
The loan industry has shifted its focus to the digital market as a means of adapting to the social and economic changes influenced by technology.
The way we spend and transfer money has largely evolved over the past decade, with many processes having been digitised since then. Digital wallets and online banking have allowed people to pay for goods and services using virtual platforms. A majority of loan applications can also be accessed online instead of having to fill out physical documents.
The information has taken on a virtual presence, with details like your credit background, employment history and financial status available at the click of a button. Personal details can also be confirmed through online sources, as long as a person has the proper authority to do so. The move to the digital world has become a necessity for traditional financial institutions as well as payday lending companies.
What are the benefits of online lending?
If you need money in a rush, scheduling an appointment probably isn’t the way you’d like to start your search. The internet has greatly simplified the search process, with various details about different lenders available in a matter of seconds.
Online applications and digitised transactions also ensure that you can carry out the loan process without arranging a physical meeting.
The virtual presence of the internet has also expanded the reach of lenders and borrowers in the industry. You could live in Newcastle, for instance, and request for a loan from a company based in Liverpool without having to travel to the region. Thanks to technology, location no longer plays an important role in identifying a suitable lender for your needs.
Comparison websites have emerged as an excellent way of comparing and contrasting different lending options. Instead of making the various calculations yourself, you just have to select the two options to compare and specific information will be automatically generated on your behalf.
Lead generators use funnel advertising to provide potential options to people whose search history shows an interest in payday loans.
What to consider when applying for a loan online
The rise of technology in the lending industry comes with its benefits and disadvantages. There are several things you should consider when looking for a loan provider online. Picking the right option is crucial to your overall experience.
The validity of a lender is one of the major issues to confirm before taking out a loan. Lenders that don’t operate under the guidelines provided by the FCA and Consumer Credit Act can pose a risk in relation to sky-high interest rates. Studies by the CMA found that over 70% of payday loans were given out by three lending giants in the UK.
According to FCA regulations, any potential default charges posed on a borrower shouldn’t exceed £15. The cap on penalties protects borrowers from entering a vicious cycle of debt as the amount owed grows unchecked over time. Lenders that don’t adhere to the penalty limit shouldn’t be trusted, no matter how good their deals may seem.