Jan 07, 2014 Simon Williams
No matter where you are or how the national economy is performing, there are likely consumers in every nation who could benefit from looking into alternative credit options. These people may not be able to tap into traditional forms of credit, so searching for other options might be their only way find relief and allow them to be able to make ends meet.
As such, many choose to contact short term lenders, as their application approval standards tend to be more relaxed. For instance, those who have less than perfect credit scores, as well as individuals who haven't yet established a credit history, can often be approved and receive their loans in hours or days at most. This can mean the difference between paying bills from unexpected expenses - like medical emergencies or car repairs - or pushing them off, yielding heavy penalties and damaging credit scores.
These businesses are often extremely helpful to people in the United Kingdom, especially as the economy is only very slowly picking back up after the global recession. However, some national leaders seem to have an unprompted vendetta against the industry and are punishing big players in any way they can. For example, the government recently announce that a short term loan interest rate cap will be put in place in 2014. Though representatives said this should help consumers, the reality is that the action might drive lenders out of business.
Consumers might not buy in
Because of the increased scrutiny and numerous confusing laws being lobbed at the sector, the International Business Times, citing a ComRes report, explained that some British consumers are considering cutting ties with short term lenders. This is a big issue, not just for the companies in question, but also individuals who might be worried about adverse effects of using the industry, not realizing that short term lending remains a legitimate way to access credit.
The source explained that only 6 percent of respondents to the survey said they would likely take out a short term loan in the next six months, compared to the 11 percent who said the same at the end of 2012.
"It may be that negative publicity and high profile interventions from politicians are starting to cut through," Liz Bingham, president of trade body R3, told the news provider, though she noted that economic data suggests that people should be taking out more loans because of "personal insolvencies."
What should lenders do?
To preserve their chances for success into the future, lenders need to ensure they are educating their clients about the current state of the sector and what the laws do and do not mean for them. For instance, even though some government representatives have expressed negative ideas about the industry, they ignore a lot of the benefits of short term lenders and don't mention the fact that these businesses were there for consumers when high street banks all but shut their doors during the global recession.
For many people, short term lenders are their only option. If these individuals don't come up with money to make ends meet, they're going to both drive themselves deep in debt and also cause lenders to go out of business.