The National Union of Students warns students against fly–by–night lenders that offer bad credit loans with exorbitant interest rates. To support their cause, the NSU is actively lobbying for a thorough examination of all the clauses involved in the Financial Services Bill. The Financial Services Bill is the controversial bill that gives power to the Financial Conduct Authority to set a cap on the interest rates applied to bad credit loans and all other online loan services.
The Financial Services Bill has entered the final reading in the House of Commons last December. It is expected to take effect within the year or early next year, 2013.
A High a Number of Students Seek Loans from Undocumented Lenders
Six percent is the official number of university students who have taken out bad credit loans from online lenders. However, according to the National Union of Students, there are actually more university students who have active loans with unlisted online lenders. Unlisted online lenders would be those that were not licensed by the state in which they operate. The term also applies to lenders who have received a lot of complaints because of their services, terms and guidelines, and exceedingly high interest rates.
The NUS believes that the only reason why university students go for these types of online lenders is because of false advertising. They point to five specific lenders who are particularly targeting university students. One of these lenders even suggests that most students will be declined for university hardship loans due to the current condition of the US economic. NUS says that a misleading information like this will definitely push a student to go for unlisted online lenders.
In a separate study launched by the NUS, they found out that one out of 10 student admits to having fallen victim to misleading online loan lenders. They traced the probable cause to a lack of education on the financial support available for students. University students with children are among the top group of students who use bad credit loans at least once or twice a year.
NUS Suggests Steps to Correctly Screen Online Lenders
While it is impossible to wipe out the already becoming tradition of seeking help from online loans, the NUS suggests steps that students could take in order to screen online lenders correctly.
The steps include the following:
· Look for lenders within the state. Online lenders are licensed by the immediate state in which they operate. So if a lender is not licensed in your state then that means it is not the allowed the service you. Just by looking at Google results, you would already see that four of the five questionable or unlisted lenders catering to students are not licensed to operate in any state.
· Ask the lender to provide you an e-mail to copy of their terms and guidelines. You would do this because you would like to read the fine print prior to reaching a decision. Merely asking chat support or talking to a lender’s representative on the phone is not good enough if you really want to be sure that you understand everything in the contract.
· Be aware of the costs before you sign the contract. This is very important because the amount of the total cost of loan will determine the monthly adjustments that you need to make.
The National Union of Students also reminds university students to contact their university and apply for a hardship fund prior to contacting a lender online. This way, if all possibilities have been exhausted before a lender of bad credit loans is invited into the picture.