Forget Payday Loans: The Co-operative Bank Has A New Loans’ Service
29 Nov 2019
Approx Reading time: 3 minutes
- UK borrowers will soon forget expensive payday loans with new loans marketplace
- The Co-operative Bank and Freedom Finance launch service allowing borrowers to sift through available alternatives of unsecured personal loans
- Borrowers to get tailored loans according to their circumstances
Several people in the UK rely on payday loans to settle bills or emergencies. However, payday loan lenders in recent times have been facing growing regulatory scrutiny because of their high-interest rates. Regulators in the UK want to bridge the credit gap by making loans affordable. Recently the FCA removed the regulation barring borrowers from transferring their high rate loans to cheaper providers.
Expensive payday loans are a thing of the past with new service
Several payday loan lenders in the UK recently went bust because of being overwhelmed with customer complaints and claims. Most of the borrowers complained of being missold expensive loans that they could not afford to repay. However, this could be a thing of the past following the launch of a loan service that can customize borrowing.
The Cooperative Bank of the UK and personal loan broker Freedom Finance have teamed up to launch the service. The loan service uses machine learning to customize personal loans to individual borrowers. With this, customers will be able to get loans that they can afford to pay.
According to Co-operative Bank, they are using technology and machine learning that will enable customers to search for unsecured loans. It will allow customers to select options of unsecured personal loans that will damage their credit score. The bank indicates that it has tailored a panel of loan providers, but it does not include payday loan lenders.
New service allows customers to search for affordable loans
Currently, loans are available from £1,000 to £25,000 with a term of between one to seven years. Similarly, interest rates will be between 3.1% APR and 39.9% APR. Customers will be able to receive funds from the unsecured personal loans within the same day they apply. Interestingly search results for the loans and the rates will be risk-based depending on the circumstances of the borrower.
Unlike for payday loans where customers get loans they can't afford to pay, the service gives customers available, affordable options. Freedom Finance CEO Brian Brodie said that the service offers borrowers loans they are eligible for. It includes providing repayment schedules to help them understand their commitments and thus pick a better deal.
Borrowers can sift through several available lenders for the best deal
Brodie indicated that the marketplace would enable its partners to enhance their offerings in the highly competitive market. He added that they were glad to partner with Co-operative to create a tailored digital path for its customers.
The Co-operative Bank Unsecured Lending Product Lead Tracey Harrop indicated that they are aware that many people seek financial assistance. Considering payday loans are unaffordable, the bank has come up with a service that will enable customers to get affordable loans. Several unsecured personal loan lenders can provide credit without negatively impacting their credit rating.