Why The Government’s Interest Rate Cap Could Drive People To Loan Sharks
There are an estimated 200,000 people in the UK who are thought to have turned to loan sharks for credit. A big problem with loan sharks are the charges that they impose for the late payers. They will typically find it next to impossible to get an affordable loan, as they can’t get loans from high street banks and may be forced into taking credit from loan sharks.
But the UK Government’s plans in 2011 to restrict the interest rates that cash loans lenders charge could drive vulnerable people straight into the clutches of illegal loan sharks. A Consumer Credit Private Members Bill introduced into Parliament called for interest rate caps on the level charged by unsecured lenders. The problem with this is that this type of cap would make it harder for legal companies to give money to certain groups of borrowers. Currently, lenders set their interest rates based on the risk of the borrower defaulting on their loan. If lenders are no longer allowed to do this, they’re likely to completely withdraw from certain sectors.
Instead of protecting the most vulnerable of consumers, this type of move could leave them out in the cold, with no alternative for low earners but to go to loan sharks to get the money that they need. Even the Office of Fair Trading which had reviewed the Home Credit sector, had concluded it met an important need for people unable to get loans from elsewhere; also, the rates reflected the reality of the market and in fact the complaint levels were low.
Instead of focusing on the illegal loan sharks who prey on the vulnerable and needy who are in real financial difficulty, and new legislation and further restrictions on legitimate financial service providers will simply have the knock-on effects of forcing responsible lenders to raise their prices or to completely leave this market, or both.
Cash Loans Lenders Can Help You Avoid Loan Sharks
Cash loans companies who give low earners and those with bad credit records an alternative to loan sharks and doorstep lenders. It’s a fact that many people today are financially excluded from access to credit. Most just need relatively small lump sums of cash of up to £500, to help to buy every day things like a washing machine, furniture, clothes or school uniforms. In many cases, these people live in areas of the highest levels of unemployment in the UK, such as Council estates and other types of housing estates, where petty crime may be common.
By offering fair loans at reasonable fees, and an alternative to the loan sharks, who prey on hard-up and vulnerable families, and are only too willing to lend cash to the desperate at hugely inflated interest rates. Legitimate loan companies can help the poorest in our society access to credit and so that they can avoid debt. By offering a convenient, affordable and trusted alternative for those on lower incomes the illegal loan sharks can be avoided.
Avoid loan sharks by trying a legal lender.