According to one of Britain’s leading accountancy firms, PricewaterhouseCoopers (PwC), payday loan lenders are going mainstream and competing with more traditional money lenders such as credit card companies. At the same time, the UK’s 45 year love affair with the credit card seems to be on the rocks as people are now using them less than any time during the last decade.
Payday Loan Lenders And Their Appeal
Payday loans are aimed at people on low incomes as a way to help them out of short term financial difficulties such as repairing of goods, new equipment or unexpectedly high bills. They are paid back on the borrower’s next payday so no continual debt is created. As well as those on low income, Payday loan lenders are beginning to attract more affluent clientele as well as younger borrowers.
According to PwC director Simon Westcott, “consumers are pleasantly surprised at the convenient and innovative service they receive from these smaller, more agile providers”. Westcott went on to say that despite bad publicity in some areas of the press and political arena in the UK as a result of high interest rates, the fact that payday loan lenders limit the size and length of the loans is very appealing to consumers who are more and more worried about taking out loans as a result of the global economic crises.
Consumers And Debt In The UK
In a survey of 2000 adults taken out by the PwC, consumers between the ages of 18 and 24 were found to be particularly worried about amassing debt and had doubts their future ability to pay back any loans they may take out. In the 25 – 34 age group, 25% said they needed to draw on credit to pay for essential purchases. The average household in the UK is in debt by around £8,000 making it one of the most indebted countries on the planet.
Payday Loan Lenders Vs Credit Card Companies
The credit card industry seems to be particularly hit by both the credit crunch and the new forms of services such as those offered by payday loan lenders. Short term loans tend to be cheaper than what gets paid on the interest rates on credit cards but when the payday loan is not paid outright and gets rolled over a few months, the cost soon begins to soar.
Less people are using credit cards today than ten years ago and in 2011, nearly one million people discarded their card. Borrowing this way reduced faster than any other type of unsecured loan however despite this, financial expert David Black from Defaqto believes the advantages and incentives offered by credit card companies may entice many people back.
Incentives Offered By Credit Card Companies
- Shopping discounts
- Points schemes
- Insurance for goods purchased
- Air miles
- Introductory offers such as CDs or other free gifts
Advantages Offered by Payday Loan Lenders
- No credit check
- Instant Approval
- Money deposited the same day
- Quick and easy application process
- Can be arranged online or even via text
For further information (including legal advice) on payday loans, please refer to the following websites:
Planning Your Personal Finances - NI Direct
Financial Services Authority
Reviewing Your Current Finances