In another bold display of irony writ large, the nation’s providers of traditional finance – the High Street banks – are taking issue instant cash loan providers for doing business with cash-strapped Brits even as they retreat from providing cash loans to those in need.
With traditional lenders retreating and the economy’s sluggish recovery sending many of nation’s consumers into a scramble to make ends meet, the payday advance industry has grown by leaps and bounds. However, banks and building societies are taking issue with the so-called ‘exorbitant’ interest rates on these loans, yet not offering their services to those Brits in need.
The costs of repaying an instant cash loan seem high due to the APR interest rate that lenders are bound by law to advertise. This only adds fuel to the fire, as calculating the interest on a 30-day loan using an annualised rate can return a figure of anywhere from 1,000 per cent to 5,000 per cent, while the real cost of repayment is around £10 to £25 per £100 borrowed.
Moreover, this can actually be much less than it would cost a cash-strapped British household if they relied on a traditional source of lending. Many High Street lenders would charge much more on an unauthorised overdraft. and as lending from banks has nearly dried up, this would be the only option open to those in economic turmoil – short of going down to the local pawnbroker and leaving their wedding band behind the counter.
Consumers value short term loans because of how convenient it can be to take one out, as many lenders accept applications over the internet and hardly any of them require a credit check. The traditional lending industry could do well for itself if they spent less time complaining how instant cash loan companies are taking advantage of those in need and instead take a few pages from the rapidly growing industry in order to help the nation’s low income earners keep food on their dining room tables and food in their larders, experts say.