How does a Payday Loan work in the UK?
Are Direct Lenders Payday Loans Legal in the UK?
The Financial Conduct Authority (FCA) regulates every Payday Loan in UK. As per their
guidelines, the cost of payday loans for 30 days is capped at £24 in fees and charges per
£100 Payday Loan borrowed.
Even with such regulations in place, Payday Loans are known to create financial
pressure on borrowers. It is for this very reason that the old-style Payday Loans do not
exist any longer. They have been now replaced with a loan that is similar in terms but is
characterized by more relaxed repayment terms. This new loan type is known as HCST
Loans – an abbreviation for High-Cost Short Term Loan.
What is HCST Loan?
Features of HCST Loans
- Loan Amount – £100 – £1,000
- Repayment Period – 3 – 12 months
- APRs – 100 – 1,500%
Are HCST Loans Regulated?
Is an HCST Loan Right for Me?
It can be said without doubt that the modern-day Payday Loan, now known as HCST
Loan incurs an excessively high APR – 100% or more. This makes the loan extremely
costly, and unviable for most borrowers.
Hence, you should carefully consider all your financing options before opting for this
high-interest loan. You should only take this loan, if you have any urgent financial need
that must be met immediately, and if you are very sure that you will be able to bear the
high cost of this loan. Before borrowing, you should have a sound repayment plan in
You should definitely NOT take an HCST Loan if you are using the amount to pay for –
- The settlement of other loans.
- Materialistic pleasures such as new gadgets, clothes, concert tickets etc. that you
simply cannot afford.
If you are unable to repay your existing debts, you can consult a debt advice agency for
free, and receive private advice and assistance from them.
High Cost Short Term Loan FAQs
Due to the high APR of HCST loan, often ranging from 100 to 1500%, it is crucial that
you carefully consider your financial situation before opting for this loan. Here are a few
aspects that need your due diligence –
- Do you really need the loan?
- Do you have any alternative which is more affordable?
- If you opt for the HCST loan, will you be able to repay the loan in time?
- Do you already have other short term loans in your name?
- Will this short term loan affect your credit score?
In order to make sure that you use this high-cost loan in a sensible manner, it is
essential that you think forward. Instead of acting on a whim, or simply out of
desperation, you should use your logical reasoning power before taking on this
expensive credit. A simple way to do so is following these steps –
- Determine the need for this loan.
- Research different types of credit.
- Compare HCST loans.
- Be honest about your upcoming income and expenses.
- Have a sound repayment plan in place.
Find Payday Loan – With Loan Broker
Loan Broker is an FCA registered credit broker that operates across the major cities of the UK. All the lenders associated with it are also authorised by the financial regulator. The mission is to promote responsible lending and hence, our lenders perform soft credit checks to offer initial quotes. Soft credit checks are safe as they do not leave any footprint on your credit report and doesn’t even harm your credit report.
We do not charge any upfront fees to our consumers. We offer an array of unsecured loans such as – debt consolidation loans, self-employed loans, to help borrowers get back on their financial track. As a credit broker, we help our borrowers to find the right lender by considering their requirements. With Loan Broker by your side, you can choose no obligation loans. We are loan brokers, committed to extending a true hand of help for borrowers seeking hassle-free, and affordable loans despite bad credit rating.
Borrow responsibly and repay timely.