More and more Brits that have been struggling to make ends meet have decided to turn to pawnbrokers for short term loans, industry experts say.
Cash Converters, a high street pawnbroker that provides instant cash loans to customers, saw its personal loan book in the UK grow almost four times last year from its value in 2010, with 2011 figures rising to £8.5 million, up from £2.3 million. The firm, with 208 stores in the UK alone, launched a new process for taking out online loans this past October and has already reported that early results have been ‘promising.’
According to the firm’s figures, an overwhelming 96 per cent of those making online applications for credit were new customers, indicating that alternative forms of credit such as pawnbrokers and instant cash loan providers have grown by leaps and bounds over more traditional lending sources such as bank loans. These sources of alternative lending may have higher interest rates associated with them, yet consumers see them more convenient – especially for those whose credit histories have suffered in the wake of the economic downturn.
However, bad credit and high interest can be a bad combination for some lenders. Customers failing to pay back Cash Converters loans increased by more than 20 per cent in the second half of 2011, with 11 per cent of the total amount being lent out being comprised of bad debts.
As a result of the increase, Cash Converters has decided to take steps to bring down bad debts. The pawnbroker has instituted stricter lending criteria as well as appointing a dedicated collections manager and overhauling their customer database.