The past year has been the year of the financial crisis. Every day, the newspapers feature stories about how the economy is collapsing, how retail giants are failing and how banks and loan companies are refusing to lend money. People are finding it harder and harder to be successful in their loan applications, so are resorting to lending to online lenders or are borrowing from doorstep lenders. Some people are paying up to 10,000% interest on these loans, even though the base-rate is getting lower- so why?
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One reason is simple- people are desperate for a quick fix. Because loan companies are being extra careful of who they lend to, for example, people with bad credit are not likely to be offered a loan at all, never mind one with an increased APR, people are looking to non-reputable companies who know they can make money from people's desperation. These companies are known to target the vulnerable, and offer them money on condition that they pay over the odds for their services. In the current economic climate, loan companies are being extra vigilant when considering applicants. Only perfect credit scores will do. This is why we're seeing a surge of popularity when it comes to high interest loans.
There is also a theory that people are not educated enough to realise that these quick-fix companies are ripping you off. People who are not aware of the lending options may go for the first company they come across, and not search for a better value alternative. It has been revealed that more than 30% of loan applicants do not understand the term APR, and would only look for a 'yes' or 'no' from a loan provider instead of studying the offer before hand. It has been said to be unfair to charge these astronomical rates of interest to borrowers as the base rate is the lowest it has been in a long time. A Conservative MP has proposed that the government should set up guidelines that creditors must follow to create a fair market- which is currently worth £3bn per year.
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