Credit card demise paves way for instant cash loan growth

A further report into the status of the average UK household’s debt has been released; it paints as bleak a picture as many of the other reports we have seen recently, only from a slightly different angle.

The latest report, by PricewaterhouseCoopers, suggests that households still hold just shy of £8,000 of unsecured debt, even though many did pay off some of that figure in 2011. And it seems that credit cards were the typical unsecured debt that suffered in favour of other types of lending, such as short term loans. A further look into the demise of the credit card has suggested that the plastic many of us have abused over the years is itself a victim of its own success and is suffering a mid-life crisis.

In comparison, a separate study, although unable to accurately pinpoint the exact growth of the individual’s usage of short term loans, has referred to their take up and common use is nothing short of ‘phenomenal’.

Credit card borrowing still stands at an average of £1,000 per UK householder who owns one (they’ve obviously not taken into account my wife’s!), although that figure did fall away some last year, as did the total number of credit cards in the public domain.

This news now brings a bit of a quandary for the lending market, particularly the credit card market. Due to the demise in our use of the facility, partly down to the stricter lending criteria adopted by these borrowers, there is some talk of credit cards adopting some sort of annual fee for using them, in order to make up for the business they are losing to the short term loans sector.

The PwC report is pretty blunt in its understanding of the UK consumer’s appreciation of short term loans. And issues a warning to High Street lenders about upping their game if they want to get the business back. Although online short term loans were seen as a novelty and only for the desperate, their ease of use and the fact that, if used correctly they can actually be a boon to the average family household’s budget, has seen consumers genuinely take to this type of lending.

Neil Blake of Ernst & Young Item Club also commented on this en masse shift to the no credit check loan borrowers by ‘poorer’ borrowers. However, his prediction is that mainstream finance authorities will tighten their lending criteria further, offering little resistance to the continuing growth of the instant cash loan sector.

Not rocket science, is it?

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