The rise of the responsible lender

Friday, 08/05/2015

As recently as five years ago, if you needed to borrow money but didn't meet the criteria for most mainstream lenders, your options were very limited. If you had been with your bank for a long time and managed your account fairly responsibly, you might be given a small overdraft, but securing a loan could prove difficult. Other than that, the avenues of borrowing went from dubious to shady, and one thing was certain - your repayments would total a sum far in excess of double or even triple what you had originally borrowed.

Getting a start when you have no credit record or re-establishing a decent profile has always been difficult. Sub-prime credit products have been around for a decade or more now, but the rise of instalment or same day loans through payday lenders has been fairly recent, and has helped a great many people not only rebuild a poor credit record, but escape the cycle of bank charges for refused payments, and further debt as a consequence.

At first - and certainly prior to any kind of robust regulation - payday loan advertising could be irresponsible in terms of how it appeared to appeal to the vulnerable and desperate, and to those who would not be able to afford to repay what they had borrowed. Images of people with shopping bags and encouragement to borrow for the holidays were rife. However, as the industry has settled down, payday lending has become responsible, and indeed respectable - the scenario where a borrower would roll their loan over for months on end has vanished. Improvements in affordability assessment have stopped people who were already struggling with debt from borrowing more than they can realistically afford.

Although small loans are still available to those who are unlikely to be accepted for mainstream lending, there is a sense of them having grown up, as those who are considered to be a poor risk or otherwise vulnerable are now largely refused borrowing. Payday loans have come of age at last.

Payday loans are not suitable for, and would be expensive as, a means of longer term borrowing and are not appropriate if you are in financial difficulty.

Representative 1269.7% APR

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