Many Britons are turning to payday lenders with ultra-high interest rates due to a lack of credible alternatives. With many banks offering limited short-term lending options to borrowers, an increasing number of people are turning to payday loans for short-term cash injections aimed at paying bills and surprise fees.
Payday lenders have popped up in Britain at an alarming rate over the past decade – a cycle that, following aggressive attempts to restrict payday lending in many states, has been called a ‘trans-Atlantic lending migration.’ As short-term lending weakens in the United States, new payday lenders are popping up all over Britain.
There are over 72,000 payday lending companies currently operating in Britain, and a growing number of new lenders opening frequently. While some associate payday loans with vices and short-term thinking, a growing number of borrowers are using short-term loans to pay off unexpected bills and recover from limited cash flow.
Economists believe the reason for the boom in payday lending isn’t due to a major employment downturn, but because of limited credit availability for those without the means to turn to major banks. Many banks, as a result of reforms to short-term lending laws, have ceased to offer short-term loans to many would-be borrowers.
The end result is a system that’s overly dependent on payday lending, particularly at the lower end of the income scale. The increase in payday borrowing has resulted in numerous statements from credit counselling groups branding the industry as being predatory and focused solely on profit.
With mainstream credit options very limited, particularly for those without a long-term source of income, it seems as if short-term lending is here to stay. The flood of payday lending in the United States, it seems, might remain in the UK for quite some time indeed.
