Payday Loan Industry May Halve in 2014
The payday loan industry has always faced of a lot of scrutiny. Some have complained for a cap on interest rates whilst others want to see a complete ban altogether. Well, 2014 might be the year set to please a lot of people as the industry is set to halve. 2014 is the year that will see the FCA take over from the OFT as the regulators of the industry, so it doesn’t come to much surprise that there will be quite a few lenders leaving just like they did in 2013 when the OFT launched their investigation. However, the new regulations are not necessarily one of the biggest factors as to reason behind the industry halving. In actual fact it’s said to be simply because of the amount of bad press that’s getting published about the loans, many borrowers are reluctant to now take out a payday loan because of the sky high interest rates and general bad news surrounding them that’s pushed by the media.
One of the other biggest factors that’s turning people away from the loans is the fact that applying for a payday loan, even if you repay it back on time is said to have a negative impact on your credit report especially if you’re planning on applying for a mortgage as many mortgage lenders will not lend money to those who have used a payday loan in recent months. Their reasoning behind this was that for someone to apply for a payday loan they must have fallen short on their finances, and they believe that for someone to fall short they can’t be taking proper care of their finances and are not the type of candidate they would want to lend to as they could be more of a risk.
Now since 2009 the payday loan industry has been on the up as the demand for short term credit has been ever increasing. The demand for short term credit is not diminishing, but people are becoming more reluctant to turn to a payday loan and other cheaper options are being explored instead, such as credit unions. Credit unions by law can only charge a maximum interest rate of 2% a month, which is substantially less than that of a payday loan company – the only downside is that to borrow from a credit union you generally have to have been a member and saved with them for a certain period of time prior.
The findings were discovered by a survey carried out by ComRes, but who knows what will happen as we move forward. One thing is for certain though there will definitely be some big changes in the industry throughout 2014 and moving into 2015.