Although many payday loan providers appear similar on the surface, there are certain differences you should be aware of.
The UK short term loan market
In 2013 the estimation was that the three largest UK lenders held a 70% market share between them.
In total, the ten largest lenders held 90% of the market.
At the end of 2013, there were more than 90 different payday loan lenders in the UK. They served 1.8 million customers per year, approving a total of almost £2.8 billion in loans.
From 2013 The UK payday loan market has been in a state of flux. With lenders having to adapt to new regulations introduced by the Financial Conduct Authority.
Most lenders experienced significant revenue drops through 2014 and 2015. Although there are expectations that end of year reports will show improvements in 2016.
The 3 biggest payday lenders
The UK’s biggest and most well-known provider of short term loans is Wonga.
Wonga has offered short-term credit in the UK for a decade, founded by Errol Damelin in October 2006.
In 2014, Wonga reported to have an estimated market share of between 30% and 40%. In 2015, revenue dropped by 64%. This was a pattern shared across the payday loan market, resulting in Wonga’s 2015 revenue totalling £77.3 million.
In 2016 Wonga now offers short term loans over up to 35 days, with up to £400 available to borrow. There are also Wonga Flexi Loans, available on three-month repayment terms. With a Flexi Loan, borrowers can request up to £500.
The Dollar Financial Group
The second largest payday lender in the UK, the Dollar Financial Group provides consumer credit under a variety of trading names.
Payday UK and Payday Express offer loans over up to 12 months, with the greatest loan amount set at £2,000.
Loans up to £490 must get paid back within a greatest timeframe of 6 months. The Money Shop offers similar loan amount and loan term options, but with a lower APR.
The Dollar Financial Group has a more extensive history than Wonga. Having founded in 1979 as the Monetary Management Corporation.
This lender operates on a global scale with headquarters in the US and more than 10 million customers worldwide. Currently, there are Dollar Financial Group operations in many countries. Including the US, the UK, Spain, Romania, Sweden, Finland, Poland and Canada.
The third largest payday lender is CashEuroNet, with brand names; Pounds to Pocket and QuickQuid.
The first of these brands, QuickQuid got launched in 2007.
Pounds to Pocket followed in 2010.
CashEuroNet UK is a subsidiary of Enova International. The broader company also operates in the US and Australia.
As a whole, Enova International published 2015 revenue figures of $652.6 million.
Payday loan industry leaders
The top three lenders, working under a variety of brand names, serve the majority of short-term UK borrowers.
Despite this, there are other options.
Well-known lenders include Peachy, Sunny, Satsuma and 118 118 money. They all provide alternative choices to the largest 3 organisations.
New UK payday loan lenders
Some providers of short-term loans have established in the UK for years. Other lenders are new to the market.
In 2016, we have seen the introduction of Vivus and the return of SwiftSterling. Some other new payday lenders include CashFloat and Quidie.
Launched in February 2016, Vivus is a true payday lender providing finance for up to 41 days.
Vivus provides new borrowers with a half price loan. Which means borrowing £100 for 30 days would need a total repayment of £112. Not £124 which is the typical rate across the industry.
Borrowers can take a loan of up to £300 with Vivus.
Payday loan lenders: different ways to borrow money
The usual model for a pay day loan is much the same as a traditional bank loan. The borrower applies, receives money (paid into their bank account) and pays it back at a later date, with interest.
Repayments may get made all in one go, or split into separate instalments.
Recently, lenders providing an alternative way to borrow have entered the UK loan market. These new lenders do not take the approach that consumers got used to. But can still get categorised as providers of short-term and payday loans in the UK.
You can borrow money up to your approved limit, pay it back and then borrow it again if you wish.
A SafetyNet Credit loan is not the same as having a credit card because the money gets paid into your bank account. This means that the funds are more flexible – they can get used to pay bills and Direct Debits without a need for an extra transfer.
SafetyNet Credit links to a borrower’s bank account. As an extra benefit, this means that it can automatically check statements. And provide a small cash injection when you go past your overdraft limit. You can avoid unauthorised overdraft fees by having this extra buffer.
SafetyNet Credit will only attempt to collect a repayment when the money is available.
With traditional payday loans, you will apply for a specific amount of money. And will then go through the approval process.
SkyQuid turns this on its head.
First, they will approve you for a maximum credit limit. Once you know how much money you can borrow, you can then select your chosen loan amount and agree to the repayment dates.
With SkyQuid, your credit limit stays valid for up to 90 days.
If you do not take loan(s) to the full value of your approved credit limit, the money remains available. And can get borrowed at a later date.
New customers will get given a credit limit up to £500. Depending on their circumstances and the results of affordability checks.
Existing customers may get offered up to £1,000.
Finding authorised lenders in 2016
Big names like Wonga get recognised in every household. New lenders, like Vivus, may not be quite so well known.
If you are applying for a loan from any new lender, check the Financial Services Register before you provide your details.
The FCA’s register lists lenders that have approval to carry out regulated activities.
Checking the Financial Services Register before you make your application for a payday loan. You can ensure you are working with a lender, or broker, that gets regulated.
For most payday loan lenders, 2016 is getting seen as the year of recovery. After massive industry change.
The Financial Conduct Authority introduced regulations that have led to compensation payments. There have been significant adjustments to loan charges, interest rates and how payday loans work.
Throughout recent years, the UK’s three biggest lenders have experienced notable revenue decreases. Wonga, the Dollar Financial Group and CashEuroNet have all been reporting losses.
2016 got estimated to be a year of growth for payday loan providers. With many expecting to be back into profit during 2017.
Vivus is the newest lender entering the UK market, with loans of up to £300. Currently, this lender is also offering half price loans for new customers.
As well as traditional payday loans, 2016 looks to be a strong year for alternative lenders. Offering revolving credit and pre-approved credit limits. These include SkyQuid and SafetyNet Credit.
SafetyNet Credit connects to a borrower’s bank account. And can provide a cash boost where needed whilst only collecting funds when they are available. SkyQuid reverses the traditional approval process. By setting an initial limit and letting consumers choose a loan amount. Up to their personal credit limit.
Search the Financial Services Register before borrowing money from a payday lender. Or before using a broker for payday loan quotes.
Whether amongst the UK’s most well-known names or new to the market, all lenders in 2016 must get authorised and regulated.
By making use of the Financial Services Register, you can safely research. As well as ensure that you are using lenders and brokers that are following FCA regulations.