Are Online Bad Credit Loan Lenders Safe?
When financial emergencies happen, getting the money that we need to cover them can be a stressful process. Without the savings in place to cover the emergency, whether that’s a home repair, burst pipe or health emergency, many of us turn to short term loans as a temporary cash injection – but what if we have poor credit scores? Well, online bad credit payday loans are also available but can drum up further safety concerns than standard short term loans. Here, we’re taking a look at whether they’re a safe and secure solution when things get rough financially.
What Are Bad Credit Loans?
Bad credit loans are designed to offer financial relief to those in emergency situations, who may not have the best credit history. In the past, these loans haven’t been available, with a lot of payday loan lenders looking directly at a person’s credit score when making the final approval decision, but changes in regulation have opened up this monetary avenue. Rather than simply looking at a credit score, lenders are required to run affordability checks on all applicants regardless of their credit score and will make a decision based on this.
In other words, if you have a bad credit history but are deemed to be able to afford the loan, you could still be accepted. This can be done with different repayment periods or fees than advertised as the standard in order to counter the risk to the lender, but do make money available when you need it.
Are They Safe?
So, bad credit loans are available, but are they safe? Well, these loans are like any other kind of payday loan and are regulated by the FCA in the same ways. Provided you are going to the right lender, you can borrow the money in the confidence that not only is the transaction secured, but that your data will remain safe as with any other loan and that it will be held under the same legislation as any other short term loan.
These regulations were introduced to prevent scams and protect the safety of borrowers. Lenders can only charge up to 100% in APR, meaning that no borrower will ever pay more than double the amount they originally borrowed, to save things getting out of hand.
How Can I Judge The Safety Of The Lender?
If you’re unsure whether you’re borrowing from a safe and trustworthy lender, you can check the following:
- Affordability – Has the lender checked the affordability of the loan? Can you afford the loan amount they’re asking for? The Financial Conduct Authority (FCA) will protect you from the excessive fees and charges, but it’s important that you consider whether the loan percentages and repayments are affordable for you and your financial situation.
- Trustworthiness – Are their terms and prices clear on their website? Are they making unrealistic promises to you about the loan or the repayment plan? You need to determine whether you feel safe with the lender you’ve found and if in any doubt, avoid them.
- Regulator Approval – Is the lender approved by the FCA and other national and international regulators? If the answer is no, it’s best to avoid them. FCA approval means that not only do they adhere to legislation, but that you are likely to be protected in the case that something goes wrong.
If you are ever unsure about a bad credit loan, you can speak to the FCA or contact the lender directly to find out more about what they offer. Make sure to do your research and only utilise this kind of loan in an emergency. Overall, however, borrowing online can be safe under regulated conditions, giving you the cash injection you need in an emergency.