Credit card providers may be driving more customers right into the arms of instant cash loan providers, experts say, as lenders such as Virgin Money raise interest rates by 50 per cent.
The no credit check short term loans industry has grown by leaps and bounds over the past few years as the economic situation in the UK has remained increasingly uncertain. Now, with credit card companies such as Virgin raising the rates on more than 15,000 of its customers, many consumers may abandon traditional lending sources and begin adopting short term loans from payday lenders in even greater numbers.
Banks and building societies have been putting the squeeze on consumers in other lending areas as well, with mortgage rates creeping ever higher even as the Monetary Policy Committee votes to keep the base rate at its lowest levels in years. One industry expert said that traditional lenders are finding it a more expensive proposition to get deposits, with the warning that more of these kinds of rate increases are more than likely to be on the way.
Other experts agree, with another stating that card companies are examining the usage patterns of customers in order to justify raising rates. Customers subject to raising rates are often caught between a rock and a hard place, as the only alternatives for those with less than perfect credit is to take out an instant cash loan.
Payday lending, while ideal for emergency situations, has been coming under continuous fire as of late due to the high interest rates associated with loan repayments. However, with traditional lenders raising their own rates, more borrowers may turn to payday lenders in increasing numbers as a result, experts say.