The Importance Of Contingency Loans For Unemployed Individuals
The utilization of payday loans is continuously growing nowadays. Its popularity skyrocketed in the recent years as many people opt to use this for various reasons. Some avail these loans just to allow some breathing space, while people who are in need of emergency money view this as a convenient remedy to their financial situations.
On the other hand, there is an ongoing concern in the payday loan industry. Organizations that support consumers warn the public about the high interest charges of these loans that may leave them struggling in debt. Unemployed people are the main targets of these discussions. Most often, they are the ones who avail contingency loans. However, they do not have a steady income; thus, finding it difficult to repay.
Charities are now getting the attention of trade associations and payday lenders to identify this rising crisis. Their primary goal is to help these unemployed people avail the loans while making sure that they will be able to repay it without trouble. This is possible by performing affordability checks prior to the approval of a loan. This includes questioning the borrower about the stability of their income and employment status. It is necessary to perform this procedure to ensure the ability of the costumer to repay.
However, there are still downsides regarding this check. Some finance associations say that they did the procedures as ordered, but unforeseen problems arise. These tribulations may cause the borrower to be laid off from work; thus, cutting his ability to repay immediately. Because of this, lenders and finance specialists advise that whenever a costumer needs to apply for contingency loans, they should seek help first in order for them to know how to meet their commitments in the event of a distress in their revenue.
Lenders and the payday loan industry also made progress in dealing with this problem. The recent release of newly revised codes for practice brings the purpose of aiding and protecting helpless borrowers such as unemployed and jobless people. The lenders are obliged to do this as follows:
• Give clear details regarding how loans work as well as the costs involved.
• Increase transparency concerning loan payback for the borrower to make initial decisions and should not be taken back by unknown payments.
• Assist vulnerable borrowers by freezing charges and interest when necessary.
• Conduct affordability appraisal to make sure that loans are fit for the borrower's capability.
• Do not compel the borrower to lengthen or roll over the term of an existing application.
• They must inform the borrower at least 3 days in advance for scheduled paybacks.
These new codes of practice were made to create improvements and solve the existing issues and problems of the payday loan industry. Lenders agree to these terms to help consumers think and assess themselves prior to application of a payday loan. This way, the consumer support groups will be able to see a significant decrease in borrower problems.
Payday loans can solve financial problems. However, it should be kept in mind that these loans are made only to cater temporary cash needs and not to solve permanent financial situations. Therefore, think twice before applying and make sure that the need for a contingency loan is extremely important.