There are many rules and regulations provided by the FCA which offer comfort and support to people who have taken out short term loans. This is a good starting point because anything which reduces the level of risk and problems associated with taking out a guarantor loan or any other loan has to be commended. This is why it is important to be aware of the different FCA regulation caps and how they can be of benefit to you.
If you are looking to find a reliable and reputable loan company, you will want to make sure that they comply with these FCA regulation caps.
A rolling over limit on loans
One of the biggest issues surrounding short term loans comes with the loans being rolled over. If a borrower was unable to pay off their loan, many companies provided the opportunity to roll the loan over and take out enough money to cover the loan and then pay off more at a later date. On the one hand, this can be seen as a positive thing as it prevents a borrower from defaulting on their loan but before too long, the amount of money a person borrowed can get out of hand.
The roll over limit has been set at two times before the balance owed by the borrower is due.
A limit on interest and fees charged per day
For all new loans and loans that have been rolled over, there has been a 0.8% cap imposed for interest and fees per day on the total amount borrowed. This is a figure that many people believe to be affordable and this should help to keep the costs of borrowing down to an affordable level.
Total cost cap
There has been the introduction of a total cost cap and this amount to 100% of the original loan. This means that the total level of fees and interest payments made by a borrower will not amount to more than 100% of the loan they have borrowed.
A default cap
If the borrower defaults on a payment there will be a capped fee of £15 in place. It is still permissible for firms to charge interest after a borrower has defaulted but they will not be allowed to do so at the initially stated rate.
When it comes to short term loans, being aware of FCA regulations caps will be of benefit, so make sure you know what you have or don’t have to pay.