Finding a responsible lender can take a fair amount of effort on the part of a potential borrower. However, it’s important to take the time to carry out this process in order to find the best value, borrower support, and flexibility throughout the loan duration. Responsible lenders help individuals achieve their borrowing goals, whether for long or short term loans.
Finding a responsible lender involves comparing either long or short term lending amounts, durations, repayment terms, contractual conditions, fees, interest rates, and policies in the event of financial hardship.
However, assessing a lender’s responsibility in providing a short term loan involves other key factors, such as their:
- Legal validity or license to lend money
- Registration and conduct as monitored by a financial regulator, such as the Financial Services Authority (FSA) in the UK
- Adherence to regulations, such as the Consumer Credit Directive (CCD)
- Compensation scheme membership
- Information on Financial Ombudsman
- Marketing practices
- Reputation in consumer reports
- Accessibility in communication and response
- Pre-contractual information provided
- Disclosures, such as links to creditors
- Loan approval or declining criteria
- Credit checking prior to loan increases
- Provision of a 14-day loan cooling-off period
- Terms of early loan repayment
- Checking such factors about lenders enables borrowers to choose responsible lenders to meet their borrowing needs and to avoid those with poor lending histories.
- Understanding loan contracts allows borrowers to know what to expect from their loans and loan providers. Consumers have rights under CCD regulations that lenders are legally bound to uphold.