Payday Loans – Loan Sharks or Not?

As payday loans have become more popular, a number of negative assertions have been made against them. One of the most common of these is that payday loans are in some way connected or affiliated with loan sharks. This is, of course, a total misconception and payday loans are actually a legitimate and beneficial form of money lending.

Whilst payday loans are repaid in one transaction and are even available to people with bad credit, this is not to suggest that they are akin to loan shark lending. Payday loans are offered to people via licensed providers and are regulated by a number of bodies and boards. This means that they are a legitimate form of money lending that are designed to meet the needs of consumers who may be unable to take another type of loan, such as a bank loan.

Loan Sharks

Loan sharks have a bad reputation –and for a very good reason. These are unlicensed lenders of money who often use scare tactics and physical violence in order to demand their repayments. They will often be unclear over the way in which their loans work and borrowers will often see themselves paying exceptionally large sums of money to pay off their original loan.

Payday Loans

Payday loans, however, are nothing like this. All of the information about the loan system is provided by the provider prior to the application being made and/or approved. This means that customers are fully aware of what is involved and what is expected of them. Interest rates, repayment schedules and loan amounts are all discussed and explained prior to the application, giving individuals all of the necessary information up front.

Alongside this, payday loans are also regulated and controlled by a number of different bodies. Providers are required to have a valid credit license and will also have data protection procedures in place to keep applicants' personal data safe. These loans will abide by the OFT (Office of Fair Trading) and will also be affiliated with the Consumer Finance Association when it comes to self regulation. This means that these loan providers will ensure that all of their dealings are legal and above board and are not connected with loan sharks in any shape or form.

Payday loans are often referred to as same day loans because they are often approved on the same day that the application is made. This is because their application process is much quicker and easier than traditional loans, such as bank loans, and does not in any way connect them with loan sharks.

Finally, if applicants are unable to meet the repayment of a payday loan then they are not threatened with physical violence or treated unethically. All that will happen is that the individual will be transferred to a collections department, where the individual's personal situation and repayment schedule will be discussed. Payday loan providers will provide every assistance to their customers in order to help ensure that they remain financially secure.

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