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GUARANTOR LOANS VS PAYDAY LOANS: SPOTTING THE MAIN DIFFERENCES

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When faced with emergencies or you want a loan to bridge a cash flow gap, guarantor loans and payday loans are among the main options out there for you to consider. Whereas the outcome of every loan is cash in your bank account, their processes, and terms and conditions differ.

Therefore, before applying for any loan facility, it is important that you understand the differences and how their unique features will affect your financial position. Here is what to expect from guarantor loans and payday loans.

 

What are Payday Loans

These are short term loans designed to help borrowers tide over until payday. Once approved, the loan is paid directly into the borrower’s bank account and at the end of the month, they repay the loan in full plus any interests and charges accrued. Most payday loans are available for terms not exceeding 3 months, but you can get long term loans that can be repaid in instalments.

In terms of amount, most payday loans range from £50 to £5,000 and can be approved and credited within 24 hours. Quotes are instant and no credit checks are done.

 

The Cost of Payday Loans

One of the most common attributes of payday loans is the high cost of borrowing. The Financial Conduct Authority (FCA) has regulations that guide the cost of payday loans. According to the law, there is a cap on the interest charged including default fees.

For instance, a borrower applying for £100 cannot be charged more than £24 in fees if they are taking the loan for 30 days. In case of delayed repayments, the most you should be charged is £15 default fees plus interest on the loan amount.

 

Recurring Payments

Many payday lenders require that you set up a continuous payment authority or CPA as part of the loan agreement. With the CPA, the lender takes their payments directly from your debit card or bank account whenever an instalment falls due. While this ensures that you don’t miss out on any repayment, it can be risky if you don’t have enough money in your account.

If you feel that a CPA is not the right repayment option for you, you can request for cancellation and set up other options such as direct debits and standing orders.

 

Guarantor Loans

As their name suggests, guarantor loans are unsecured credit facilities co-signed by a guarantor. Almost always, the guarantor is a person well known to the borrower such as a colleague or family member.

The guarantor co-signs the credit agreement taking an obligation to repay any outstanding balances should the principal borrower default. If you do not have sufficient credit history or your incomes are low, applying for guarantor bad credit loans can see you getting approved.

While payday loans are often for small amounts, guarantor loans range from £500 to £15,000. This means you can use these loans for major payments such as mortgage instalments, major house repairs and renovations, or even down payments for car purchases.

Guarantor loans are generally long-term loans some extending to more than 36 months. This gives you relief in the repayments meaning you will be repaying smaller amounts leaving you with extra cash to handle other issues. For payday loans, the payment periods are shorter thus making the instalments bigger.

 

Getting a Guarantor for Your Loan

As opposed to payday loans which are unsecured and pegged on your paycheck, guarantor loans require that you find yourself a guarantor. The guarantor should be financially stable, a UK resident with a debit card and a UK bank account and between the age of 21 and 75. Whether they are retired, self-employed, or employed, the guarantor must have a regular income.

The lender will examine the guarantor’s credit scores together with the borrower’s credit history to assess the amount to approve. As a guarantor, you are taking on some financial risks which could see you incur costs or getting listed for defaulted debts.

Also, when being assessed for personal loans, lenders may take into consideration all the guarantee agreements that you have signed as they represent contingent liabilities.

 

Default on Guarantor Loans

Delayed or missed repayments can have repercussions for both the borrower and the guarantor. Most lenders will give you enough time to catch up with your payments. However, if it becomes evident that you cannot repay your loan, your guarantor will be contacted so that they can take up any outstanding balances.

Recently, there has been sustained complaints about some of the biggest lenders in the UK personal loan market. Most of the complaints came from borrowers who felt that their lenders had mis-sold guarantor loans to them. In the credit lingo, mis-selling is when a lender approves a loan while knowing too well that the borrower or guarantor cannot afford it.

Loan affordability means you can be able to repay a facility on time while leaving you some money that can help you pay your bills without having to take another debt. It is the responsibility of the lender to ensure that the repayments are affordable for both the guarantor and the borrower.

In case of a default and the guarantor is called upon to pay up the balance, a record of the expected payments may be registered on their credit report thus impacting their credit score. Some lenders record the borrower’s account as a joint account right from the beginning hence showing on both the borrower and guarantor’s credit reports.

 

Conclusion

Both payday loans and guarantor loans are easy ways for you to get approved even if you have bad credit. However, the loans will differ in terms of loan size, interest rates payable, and repayment terms. If you are looking for a longer-term loan with attractive interest rates and bigger loan sizes, a guarantor loan is for you. On the other hand, payday loans can be quick to get with no need for a guarantor but their interest rates are usually very high. Before you take a payday loan, think through the alternatives available.

 

Business

IS SCARCITY OF TALENT THREATENING THE UK’S FINTECH CROWN?

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To be attributed to Rafa Plantier, Head of UK and Ireland at Tink

 

From the Square Mile to Canary Wharf, London has been the historic centre of global finance, with long-established trading exchanges and trusted financial institutions. In the digital era, it has also ensured that it’s moved with the times to become a thriving hub for fintech.

But the UK financial services sector is now at an inflection point. In the past year, London’s position as a global fintech leader has been under threat. Earlier this year, Amsterdam overtook The City as the largest European share trading hub. The European Banking Authority moved from London to Paris. And Dublin, Paris and Frankfurt are all competing to win a greater share of the European financial marketplace.

The culprits of the shift are the twin challenges of the pandemic and Brexit, combined with the speed of technological transformation in financial services – disrupting the traditional flow of people, capital and ideas. So the pressing question for the industry is: how do we maintain and, more importantly, accelerate momentum to retain London’s fintech crown?

The answer revolves around one key thing — people.

 

Diverse talent drives innovation

Attracting the best talent is crucial if the UK financial services sector is going to continue to thrive and retain its global position as the preeminent financial centre.

In February 2021, the Kalifa Review laid out a strategy and delivery model for the UK to lead the fintech revolution, covering five key areas. These included skills and talent, investment and international attractiveness and competitiveness. But what became clear was that access to the right level of highly skilled talent was one of the biggest challenges for UK fintech, with barriers spanning both domestic skills shortages and the need to access foreign talent seamlessly.

As a native Brazilian in the UK, working for a Swedish-owned fintech, I understand these challenges as well as anyone. I love London, but we must recognise that fintech firms need unique talent and skills, and such a talent base can’t be met by a single city – not even one as resourceful as London. Not only do fintechs require technology and data specialists, but also experienced managers with good knowledge of high-growth companies and financial services.

As someone lucky enough to have worked with startup and scale-up fintechs across the world,  I understand the unique grounding that comes from being a part of a high-growth global company. That’s why I believe it’s vital that we attract people from across the world with commercial experience at ambitious, rapid-growth businesses — so they can bring this experience to bear on the UK financial services sector.

At the same time, many companies face renewed pressure to create new services and products to meet expectations for growth. That is why it’s critical that the UK has access to people with the right technical skills in areas such as software engineering, DevOps, Cybersecurity and data science.

Put simply, having the smartest minds delivering the best products is good for everyone. It drives efficiency, productivity,  growth and, ultimately, prosperity.

 

The UK is open for fintech

The UK should be proud of being a fintech pioneer and the driving force behind legislation that helped usher in the era of open banking. There is now an exciting opportunity to take this even further. Having access to a diverse pool of talent and skills will empower the financial services industry to create innovative products to tackle complex social challenges, such as better B2B payments, financial inclusion and climate change.

The good news is that the UK government clearly recognises the role the industry has to play in driving growth and innovation. The 2021 Autumn Budget reaffirmed commitments to reskill the nation. With £3.8bn budgeted for skills and a formal criteria for the long-awaited Scale Up Visa, the Chancellor announced a set of proposals that will support the breadth of our sector — from startups right through to unicorns and incumbent banks. This will be essential for fintechs like ours to continue to trailblaze and for the UK to differentiate itself on the global stage.

In an increasingly competitive global landscape, and to sustain momentum, we must keep talent avenues open to attract the best of the best in the industry. As one of the fastest-growing areas of the UK economy, the benefits of nurturing UK fintech to drive productivity, growth and lead the UK’s post-pandemic recovery, cannot be overstated. 2021 has seen a surge of activity in the industry and I am eager to see what London’s fintech sector can achieve in 2022.

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

Jennifer Sims, Senior Consultant at Xledger

 

The world of finance software is evolving quickly, but with many new software contenders entering the market it can be a mindfield for organisations. Many finance teams are already using multiple accounting apps and software packages for bookkeeping, payroll and invoicing to service individual needs. Whilst it may work fine for now, this segregated approach isn’t sustainable for long-term growth. The world is swiftly moving to agile, automated ways of working. As a result, there is a growing need to choose suppliers that can fulfil multiple functionalities within the one platform.

Financial software is evolving at such a pace that it can be difficult to keep up. Changing up a finance solution is a big step and ease of migration can be a substantial factor in determining which solution provider to go with. But how do you choose a solution that will grow with your business and still offer something innovative in five or ten years down the line? The fear is always that non-techie organisations will end up falling behind, but in such a highly concentrated industry, how do you decide which solution would work best for you?

 

Cloud-first: the term that makes all the difference 

You could find a ‘cloud-based’ service with an application that comes with automated audit trails to make it easier to meet compliance and record-keeping obligations, for example. But for a solution to offer all of the many future benefits promised by the cloud, it needs to have been built specifically for a cloud environemt from the outset – ie. not an on-premise built system that has been later adapted. Cloud-first services (true cloud) were always intended to leverage economies of scale, cope with live updates, be accessible from anywhere with an internet connection, and to scale rapidly, to name just a few of the many benefits.

When we talk about innovation in financial technology, we’re not just talking about software that makes it easier for the financial controller to create reports. If eliminating reliance on Excel spreadsheets is the only tangible benefit you have to really shout about, you are missing out on the real deal. With ‘true’ cloud finance software the sky is the limit.

Finance and accounting technology needs to directly meet the needs of the finance function and support the wider business needs.  When looking at accounting software platforms you’d be hard pressed to find one that doesn’t now promise ‘cloud-based’ enterprise resource planning (ERP) capabilities. The cloud is nothing new, but it’s the way that a solution harnesses this environment that makes a real difference. And here is where there is a need to read between the lines.

 

Automate more with true cloud 

Historically, repetitive and manual tasks are typical of the finance role – from invoice postings to expense claims handling – these can overwhelm the finance team. Research by Xledger[1] has found that an enormous 91% of CFOs and finance decision makers are carrying out at least one of these repetitive tasks as part of their job. What’s more, senior finance leads are averaging a whopping 25 hours per week carrying out repetitive and manual tasks, compared with 15 hours for other finance decision makers.

A modern, true cloud finance system can enable your business to automate repetitive tasks and provide one source of truth so that teams can make informed business decisions that will help to scale a business. Bank reconciliation, dashboard creation and reporting are just some of the tasks that can be handled automatically.These capabilities are aiding overtasked finance teams and saving hundreds or thousands of hours a year.

Whilst different companies are at different stages in their digital transformation what is clear is keeping up with the latest technology is fundamental to the future success of an organisation.

Xledger is a true cloud finance solution. The basics include invoicing, robust general ledger accounting, detailed slice and dice reporting, purchase orders, billing, VAT reporting, and cash and bank payments. It also adds process and structure to the enterprise with procurement and inventory, budgeting and forecasting, and project accounting. Users are always on the latest version of the software and with regulation more stringent than ever today, Xledger is ISO 27001 accredited.

Choosing the right provider for your financial ERP solution comes down to whether it has the fundamentals right. When hosting all of your vital data in the providers’ own servers, it should evidence a highly tested security process that comes with backup services as standard.

As our demand for technology capabilities grows and as ERP models progress, innovation will become the structure for growth – and there is no end to the possibilities.

 

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