At the end of 2015 the Bank of England revealed that it was a significant year for the personal lending industry, with lending reaching the highest level since before the 2008/9 banking crisis. In October 2015, consumer lending increased at an annualised rate of 8.2%, the highest level since February 2006, indicating that the personal finance industry in the UK is more popular than ever before – with no signs of slowing in 2016. It’s also worth noting that car loans were one of the most popular types of lending, with an increase of 9.6% – the highest increase for a decade. So, what is it about the lending industry that is so attractive right now?
Loans for everyone
The diverse nature of the UK lending industry means that there is a loan option for just about everyone. If you don’t want to deal with mainstream lenders then doorstep loans offer a more traditional, face-to-face type of lending. If you’re looking for short-term loans for small amounts then payday loans are perfect. As the personal lending industry has grown it is now able to offer far more diversity of choice, including low interest loans, long term loans, householder loans and options for those with historic credit problems. This has opened up lending and allowed more people to take advantage of personal finance.
Personal finance benefits
We are a lending driven society, from the fact that 6.9 million households in the UK own their home via a mortgage, to the reality of buying a car today – according to the Finance & Leasing Association around a million new cars were purchased via leasing in 2015. There are so many benefits to using finance and for many of us personal loans and car loans make accessible something that we may otherwise not have the cash for – such as a property or a car. The speed at which you can obtain a loan is one reason why they are so popular – many different types of loans are available within a few hours or a few days of making an application, making them ideal for bridging a gap in finances, such as an unexpectedly large energy bill.
Poor credit record finance
The widening in scope of personal finance has allowed many more new options for those who don’t have a perfect credit score. Guarantor loans give anyone the opportunity to borrow with the backer of a guarantor who provides the reassurance that the lender needs in order to be able to lend. Payday loans also offer options to anyone with a less than ideal credit situation – in general they are loaned against the income required to pay them back, rather than credit history, which makes them easier to borrow. Although credit scores are checked by payday lenders, it’s still perfectly possible to borrow as long as there is the income to show the ability to repay.
In general, the personal finance market in the UK is made up of a large number of loans that are unsecured. While obtaining a mortgage requires a property as security (i.e. something the lender can sell to recoup their loan if the borrower can’t repay), personal loans, payday loans and guarantor loans, for example, are unsecured. This means that lending is made available to those who don’t have assets such as property. Instead, the decision as to whether or not to lend is made on the basis of personal financial circumstances with a review of credit report and history of making payments on time. This has made personal finance something that many more people can access, introducing additional flexibility into spending and budgets that may not otherwise exist.
Looking ahead at 2016
As most experts believe that interest rates won’t rise this year there is no reason to believe that personal finance might become any more expensive and so it is likely to remain popular. The trend for car loans is still strong and given that the average price of a new car is now around £28,000 this is likely to remain an essential for many people who are looking for a new set of wheels. Payday loans have had something of a make over thanks to recent regulatory changes that now require them to be more affordable and better managed, resulting in a more responsible industry all round and better opportunities to borrow. Given that estimates indicate around eight million payday loans are granted a year there are obviously plenty of people who find this type of finance useful, and will continue to do so.