The short term payday loan market has many lenders who provide anything from a 3 day to a 1 month loan and any period in between.
However, there are people who have access to the mainstream lending market through an unsecured loan and their bank overdraft or credit card, but they tend to rely on the short term payday loan sector for their urgent cash and 1 month loan needs due to the speed of receiving the funds and the quick online application process.
They like the fact that the loan has to be repaid after 1 month, leaving them with no expensive debt to carry for longer than they need to.
This is in fact one of the main reasons for the rapid growth of the unsecured short term payday and 1 month loan sector in the UK, as more borrowers who would normally not be targeted by the lenders are using these products.
Unsecured and Secured Loans
This market can be split into the following sectors:
â¢ Mainstream 1 to 5 year Instalment Loans
â¢ 1 to 12 month Instalment Payday Loans
â¢ 3 day to 1 month Short Term Payday Loans
â¢ 5 to 25 year Instalment Loans, usually Secured against a property.
Many people who have less than a perfect credit history and are on a low income tend to need using the 1 month loan option to make ends meet on a regular basis.
Similar people who are homeowners, but have been left with a poor credit record due to the credit crunch, can still access the mainstream loans market through using the equity in their property as security for a âsecuredâ loan (top up or a second mortgage), which can be for amounts up to Â£150k. The lenders in these cases are less interested in the bad credit history of the borrower, as they have the security of the property, which can be repossessed and sold to get their money in case the owner has problems with repayments.
â1 Pound Fishâ!
Some low income people sometimes find themselves in a situation that they couldnât even afford the so called â1 Pound Fishâ. The 1 month loan provides consumers in these difficult situations the ability to survive until their next payday.
Many of the largest payday lenders, such as Wonga, Quick Quid and PaydayUK, have been in business for many years and have helped develop the short term payday loan market online. The competition has also created a platform for the many companies to force down the interest rates (APRs) being charged by some unscrupulous lenders.
The rates could be forced even lower due to legislation being introduced from 2014 that intends to âcapâ the interest rates charged by the payday lenders. Many campaigners have pressed the government to amend the Financial Services Bill going through the House of Lords with even more legislation against the sector. But, so far there has only been a few amendments made that cover the payday lenders.
It is possible that 2013 will be the most lucrative for the 1 month loan market, as any interest rate cap will affect many of the smaller lenders who rely on the high APRs to continue in a very high risk market due to the number of people who may default on their payments.
Gimmedosh.com is ready for the increase in applications and the future changes expected in 2014 by using only the best providers.