Credit lines – a modern-day misconception
Credit lines can have a pretty bad reputation – largely due to their association with ‘payday loans’. There are a lot of myths and misconceptions floating around, some being carried over from times gone by, which make them seem far more dangerous and sordid than they actually are.
Make no mistake, the myths that still surround payday loans (also known as credit lines) aren’t pure invention and conspiracy; there is definitely some fire behind the smoke. In the past, the level of regulation on payday loans was so low that certain lenders did exploit the vulnerable. Aggressive marketing tactics were sometimes used and people were offered loans that they were never realistically going to be able to pay back, leaving them with high levels of debt.
However, it’s important to stress that that was the past. In the past 10 years, there have been huge changes made to the way payday loans operate making them safe, sensible and a really attractive option for millions of people. Back in 2014, the UK Financial Conduct Authority made payday loans far safer for consumers. In addition to this, institutions like the Financial Ombudsman Service in the UK, are always on the lookout for irresponsible lending.
Unfortunately, many of the suspicions associated with them are still prevalent in the media today, meaning that myths and misconceptions around payday loans are rife. With VIALET’s payday loan option available in Poland and soon to be operational in Latvia, we wanted to separate the fact from the fiction.
Myth 1: Credit line interest rates are unbelievably high
The interest rate (in other words, the amount you will have to pay on top of the money you have been lent over a certain time period) will depend on which credit lender you choose, and can be completely reasonable. VIALET doesn’t charge any interest at all, only a fixed monthly payment pre-agreed by our clients, making repayments very much manageable once the money that you’re expecting comes in. If you don’t use your available credit, or pay it back within 30 days, there is no charge whatsoever.
Credit lines make money through preying on the vulnerable
We don’t argue that this type of thing will have sadly happened in the past due to corrupt and devious lenders. However, even if those same companies (or new ones) wanted to act in a similar manner, tighter regulation makes this activity impossible today.
Those in positions of financial turmoil that are at risk of spiralling into debt are simply not allowed to be granted short-term loans – with the responsibility falling on the lender to ensure this does not happen. Lenders cannot lend if they don’t have a good reason to believe you will be able to pay that money back.
Myth 2: Credit lines are for severe emergencies
Credit lines exist to enable people to get quick access to a relatively small amount of funds without having to go through weeks of bureaucratic rigmarole with the bank. We often associate them with being used to cover bills coming out just in time or paying for an unforeseen event such as a car needing immediate repair work.
Whilst they can indeed be very useful in these circumstances, there is absolutely no reason we should view them this way. Perhaps you’ve just seen a good price on a new sofa that you’d really like, but you don’t quite have the money at that exact moment. VIALET’s credit lines prevent you from missing out on great deals just because you’re a little bit short of the funds and won’t get paid for a week or so.
We need to stop thinking of credit as a last resort and more of a way in which we can shop with more freedom. With VIALET, an easy-to-use credit line is just one aspect of a more modern, smart approach to your personal finances.
Myth 3: If I can’t pay the money back, I’m in real trouble
One of the silliest of the myths is that credit line lenders are more or less loan sharks. If you’re unable to pay it back on time, two large men with baseball bats will appear at your front door to take away your possessions – or worse.
Remember, credit line lenders are regulated financial institutions, not families in The Sopranos. We’re of course not saying that it’s ok to not pay your credit back, but don’t let fear of repercussions prevent you from considering it as an option. At VIALET we offer a 5 day period after invoicing you for you to pay back your loan without any fee. Once that period has expired, the maximum penalty you can pay is 11.2% on top of the money that was credited to you.
It’s important that you pay your loan back to avoid further charges, but the lender will help you with ways to do this if you are experiencing some difficulty. This isn’t TV, you’re not in any danger.
Myth 4: There are always hidden fees with credit lines
Again, this is something that regulation has attempted to fix. Companies must now be very transparent and upfront about all costs involved with credit lines. At VIALET, we have no hidden fees or charges – they are all available to read here. Everything is laid out to you from the beginning so you can be fully sure you’re making a decision you’re happy with.
Frankly, we wouldn’t want it any other way.
It will take time for the perception of credit lines to change but it is our hope that the more people are educated as to how they now work, the more they will be seen as something that can really help their finances, not exploit them.
If you’d like more information on how VIALET’s credit line works, click here to download our app, discover all our loan options and enjoy financial freedom today.