UK credit crunch leaving many consumers underbanked

British consumers have experienced their share of struggle over the past few years, and a recent study from DFC Global indicated that the economy isn't exactly on the upswing.

Furthermore, the company's chairman and CEO, Jeff Weiss, anticipates that recent legislation reform will lead to continued stagnation with regard to short term lending.

"We believe this transition is causing a temporary 'credit crunch' for consumers in the United Kingdom, many of which currently have multiple short-term loans outstanding," Weiss said.

But the report, which analyzed consumer and business lending during the third quarter of 2012, wasn't filled with entirely bad news. Alternative short term lenders and credit firms have been able to emerge as a result. One of those methods include internet loans, which Weiss expects "will continue for the foreseeable future."

So how exactly does alternative lending help underbanked consumers? To start with, these methods have made funding available to a significantly higher percentage of consumers, especially those who fall into the subprime credit category. Some alternative lenders have begun using Payment Reporting Builds Credit scoring methods, which determines a person's eligibility based on his or her ability to pay things like utility bills on time.