The Payday Loans industry
The economic slowdown started with all the banking crisis, even though many of the banks celebrated in August returning to billion pound profits, they have got still still did not bring their lending back to near pre-crisis levels, and are insisting on higher interest levels and excessive demands for security. Consequently, around the 13th of September business secretary Vince Cable told UK banks they are well capitalised and have no "excuse to restrict credit". The banks claim that they are not restricting their lending, which instead there is certainly depressed interest in loans. They also assert that new rules which require these phones hold more capital will force these to restrict lending later on. While economic uncertainty plus a low base rate have meant a lot of people are actually reducing loans, rather than getting new advances, it can be clear that there exists demand there which is not being sufficiently met with the banks.
The business secretary, Vince Cable, was primarily talking about the fall in lending to businesses, which fell for the 11th successive month in July, according to The Bank of England. Small businesses especially have suffered - something which has become picked up on heavily on tv, in part because we"re depending upon small, entrepreneurial businesses to revitalise the UK economy. However, it is not only businesses which are finding it tough to obtain credit. The Bank of England also reported that net mortgage lending slumped for the 4th lowest level on record, reinforcing worries of an new housing market crash.
The British public can also be finding it tough to obtain short-term loans from street banks. This is restricting consumer spending and holding the UK economy back. Earlier this week, official data through the Office of National Statistics indicated that high street spending dropped recently for that first time since January, preparing fears of an double dip recession.
People that have not had time to acquire loans from banks have increasingly started to approach other lenders. This is particularly the truth with short-term loans - Google trends show there has become a dramatic increase in looks for short-terms loans, such as Payday Loans. Another reason for this increase is that average income has fallen, due to increased unemployment and pay freezes, causing more and more people to require loans to maintain their quality of life. For many borrowers, taking out a cash payday loan can be a fast and efficient method of obtaining short-term credit. As long as the borrower is smart and repays the amount of money promptly around the next paycheck, such a lending can be less than credit cards charge or paying an unauthorised overdraft.
The Payday Loans industry has received some criticism recently as a result of reports of high interest levels being charged, but this won"t look at the fact actually meant to be short-term loans which rates reflect a higher risk for that lender.