It seems the expanding world of short term loans is not going to get rid of its controversial image any time soon and there are plenty of stories that illustrate the good and bad sides of the industry.
One young man who worked as an administrator for a British company was short of a quid or two when he wanted to go away for a weekend break with his friends. He was amazed and delighted to be able to get hold of an instant cash loan just when he wanted one, instead of relying on scrimping and saving on his miserly salary.
What he found particularly attractive was the anonymous way that the instant cash loan provider was able to offer the short term loan he took out and the speedy way the money was deposited in his bank account.
The downside did not emerge until much later. Within eighteen months he owed eighteen thousand pounds in debts to more than one short term loans’ company and was even thinking about committing suicide.
The young man said that he felt totally isolated and consumed by guilt after he took out the loan, as he felt that he couldn’t tell anybody about his situation as he slid more and more into debt.
The other side of the story is illustrated by people like John Lamidey, who is the chief executive of the Consumer Finance Association, that embraces some of the most important short term loans companies in the country.
He says that there are very few genuine borrowers with problems when it comes to short term loans, “but there are large numbers of activists and campaigners who have a problem despite the fact that they do not use the service directly.”
Lamidey says that he can confirm that there have been thousands of satisfied consumers over the last few years. He says that most people like the way that they can take out a loan any time they want.
The CFA think that any investigation into the industry will help to improve its image and remove the worst of the fringe element that are helping to give short term loans a bad name.
Wonga, with companies like the MoneyShop and QuickQuid are some of Britain’s biggest alternative lenders, say that they have a sophisticated algorithm that is able to work out whoever is a credit risk quite successfully. They say that their default rate stands currently at only 7%.