There's no doubt about it- the loan market is struggling. Loan companies are refusing to lend, yet people are desperate to borrow. Many loan firms make its applicants undergo a credit check and an affordability test to make sure they will be responsible lenders- which is why over 5 million people were rejected for their loan applications is 2008. More people want to borrow, yet less loan companies are willing to lend, so where does this leave the British public?
Some lesser known loan companies have started to offer 'no credit check' applications, meaning that people with bad credit (who may have proved themselves to be irresponsible lenders in the past) can come away with a loan. These companies also tend to offer a quick service, for example, money in the bank within two days. This would sound fantastic for someone in need of fast cash, but there is always a catch. The levels of APR on these services are astronomical. For example, someone who borrows £1500 over a period of 73 weeks could end up paying back more than £4500.
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The Office of Fair Trading has recognised that these loan companies are targeting the vulnerable, those who have bad credit but desperately need to borrow money. The organisation has also recognised that these loan firms may be trying to attract younger customers- some advertisements for these loans have been found on Facebook- a site which is hugely popular with the younger generation. The Office of Fair Trading has questioned these firms, all of whom claim that they are trading fairly. The firms claim that they are lending responsibly because their applications include an affordability form, which they insist that if a customer fails to prove that they can afford repayments, then their application will be unsuccessful. The Office of Fair Trading has said that no matter how much these firms claim to be lending responsibly, they simply can't be if lending to money to those with bad credit histories. The organisation is currently trying to create more rules for this industry, to prevent loan providers from lending irresponsibly. This process could take up to twelve months.
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