Finance

GUARANTOR LOANS VS PAYDAY LOANS: SPOTTING THE MAIN DIFFERENCES

Published

2 years ago

September 20, 2021

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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.

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Business

In-platform solutions are only a short-term enhancement, but bespoke AI is the future

Published

24 hours ago

September 27, 2023

editorial

By Damien Bennett, Global Director, Principal Consultant, Incubeta

If you haven’t heard anyone talking about artificial intelligence (AI) yet, then where have you been? Conversations about AI and its advantages to society have been a key talking point over recent months, with advances being made in the generative AI race and ChatGPT opening a whole plethora of possibilities. Many have highlighted the advantages of AI, but notably it’s ability to create human-like content.

But these discussions have only scratched the surface of what AI is capable of doing. It is for far more than just essay writing, adding Eminem to your rave and photoshopping dogs into pictures.

In marketing, we have been using AI for years, for everything from analyzing customer behaviors to predicting market changes. It’s enabled us to segment customers, forecast sales and provide personalized recommendations, having a huge impact on how our industry works.

It is even, for the more savvy marketers of the world, becoming a key tool in maximizing budget efficiency – which is apt, considering over 70% of CMOs believe they lack sufficient budget to fully execute their 2023 strategy.

Now, as AI becomes more intelligent, the number of efficiencies it can unlock continues to rise. Not only can it help brands get the most out of their available resources and identify any areas of waste, but it can also help highlight new opportunities for growth and maximize the impact of your budget allocation.

The trick, however, is to veer away from the norm of using in-platform solutions with a one-size-fits-all approach and create your own, bespoke solutions that are tailored to your business needs.

Pitfalls of in-platform solutions

In-platform solutions aren’t by any means a bad thing. In fact, built-in AI tools have become increasingly popular, owing to their ease of integration, user-friendly interfaces and minimal set up requirements. They come pre-packaged with the platform, offering the user the ability to leverage AI technologies without the need for in-depth technical expertise or the upfront cost of building a solution from scratch.

However, the streamlined and accessible nature of in-platform AI solutions comes at the expense of complexity and customization. They are designed to serve a broad user base, but for the most part are built using narrow AI solutions with predefined features and workflows.

This makes them great for assisting with common AI tasks, but they lack the flexibility to tailor functionality towards unique business requirements or innovative use cases, limiting the potential efficiencies and cost savings that can be unlocked. Additionally, if a business’ competitors are using the same platform, they are probably using the same AI solution, meaning any strategic advantage gained from these will be reduced.

Bespoke AI solutions, on the other hand, may carry a higher initial investment – but can offer a significantly more attractive ROI over a short amount of time.

Why customized and adapted AI is the key

The difference between bespoke AI and in-platform solutions is similar to that between home cooked food and a microwave meal. Yes, it is more time consuming to prepare, and yes it likely carries more of an upfront cost, but the end result is going to be far more appealing and will carry more long-term value (financially… not nutritionally).

That’s because bespoke solutions, by nature, will have been tailored to address your brands specific needs and challenges. These custom-built tools allow for much greater efficiencies by streamlining workflows across different channels, automating more complex tasks, and providing deeper, more relevant insights.

The increased level of optimization can significantly improve productivity and reduce operational costs over time, offering a higher ROI. The increased flexibility of bespoke AI also allows brands to implement innovative use cases that can significantly differentiate them from their competitors.

The data analyzed can be specifically chosen to match business requirements, as can the outputs of the AI tool, providing a significant advantage when understanding and acting on the insights provided.

Additionally, these tools are, by nature, more scalable. They can be updated, upgraded and expanded as needs change, ensuring they continue delivering value as the business grows. They can also be designed to integrate with any existing IT infrastructure, from CRM systems and databases to marketing platforms and sales tools – leading to more efficient and effective decision-making.

Managing finances with AI

It’s no secret that AI in marketing automation has, and will continue to, revolutionize the way marketing is done. It has a bright, if slightly terrifying, future and can help CMOs to unlock new efficiencies, maximize the impact of their budgets and increase their ROI. And as this technology becomes more advanced, its impact will only increase.

But we already know that…and so does everyone else.

So, in order for businesses to make themselves stand out from the crowd , they must look to fully adopt the power of AI. Creating a customized and unique AI solution could be the way to set yourself apart from your competitors. A bespoke AI tool can provide brands and businesses with features unique to them and their business needs. As a result, companies will benefit from more useful data and better results to make more data-driven decisions for their business. Ultimately, this will help brands to maintain a competitive edge over their competitors, deliver ROI and most importantly optimize their budgets.

Business

Is your business suffering with Fintech FOMO?

Published

2 days ago

September 26, 2023

admin

Tom Kiddle, Chief Commercial Officer at Equals Money

It’s a challenging time for businesses of all sizes, but the past three years created storms that are particularly hard for SMEs to weather. For businesses dealing with shrinking margins, while a weakened pound is making international purchases more costly, it’s a scary time.

For many businesses this meant initially reigning in any unnecessary costs, reducing investment in anything deemed as a ‘nice to have’, and focusing on keeping the lights on. However, despite not being out of the woods in terms of economic challenges, this year many SMEs have their eyes on growth.

While some might have been buoyed by the news that the UK narrowly avoided a recession at the end of last year^[1], data shows businesses were already making investments before this news was released. In fact, UK business investment rose by 4.8% in Quarter 4 (Oct to Dec) 2022, coming in at 13.2% above where it was during the same quarter in 2021^[2].

So, where are SMEs putting their cash? As well as predictable spending on IT equipment, machinery, and transport^[3], businesses are also putting more funding than ever into technology investments – a trend that isn’t slowing down anytime soon. UK tech investment is set to grow at its fastest rate in over 15 years, both in terms of budget but also headcount^[4]

Tom Kiddle

UK businesses are clearly seeing the real opportunity that technology, in all its various forms, presents to their operations. This may also be bolstered by the fact that tech investments are potentially more cost-effective now that the government has made recent changes to R&D tax relief, which sees things like cloud computing and data included in expenditure categories^[5]. When it comes to revamping legacy systems and introducing Fintechs that offer businesses a smarter, easier, automated way of doing business, investing in technology can increasingly feel like a no brainer.

However, it’s rare that a one size fits all solution exists for businesses. What works for your competitor may not offer the same benefits to your organisation. In a world with so many risk factors, making smart investments that are aligned to your individual business goals is key.

Tom Kiddle, Chief Commercial Officer at innovative money movement solution Equals Money, explains four ways businesses can reap the rewards of smart tech investments:

1. Measurement

Can you measure the impact it will have on your business? It doesn’t have to be monetary, but if it gives you efficiency, visibility, or certainty, these can have measurable tangible impacts to your top and bottom line.

2. Insight

Does it tell you something you didn’t know before about your customers, your employees, your suppliers, and their behaviour? What could you do with that information? Often, businesses lack critical insight on their key drivers, and understanding those can open up new opportunities.

3. Action

Pretty charts and graphs make for good reading, but make sure you’re taking action with your new piece of tech. Setting accountability for action from your latest investment will drive your business to achieve a return on that investment and ensure it doesn’t sit on the shelf.

4. Adoption, adoption, adoption

Often, the latest tech trend may seem like a great investment to the motivated few, but look more broadly: if your intended internal target for your new tech fails to adopt the new practice, you won’t achieve the return promised. Also, more likely than not, you’ll frustrate both the key supporters of the new product and those you’re imposing it on.

Innovative technology, particularly in the finance space, can transform the way you do business, but avoid being lured in by solutions that don’t align to your individual needs. Good suppliers should always take the time to give an honest appraisal of whether their product is right for you and should leave you feeling empowered to devote time to what matters most – growing your business.

^[1] HR Solutions, 2022 ^[2] The Guardian, Feb 2023 ^[3] ONS, Dec 2022 ^[4] ONS, Dec 2022 ^[5] Nash Squared Digital Leadership Report, 2022 ^[6] BDO, 2023 [1] The Guardian, Feb 2023 [2] ONS, Dec 2022 [3] ONS, Dec 2022 [4] Nash Squared Digital Leadership Report, 2022 [5] BDO, 2023