We have noticed a couple of the bigger Guarantor lenders, including Amigo, are not offering the most flexible and therefore cost effective options to potential borrowers. So take Amigo for example; you can now only borrow in increments of £250 and periods of whole years; 1,2,3,4 or 5 years.
This means if you wanted to borrow, say £1,300 over 14 months, you would have to chose £1,500 over 2 years. Cost in interest £725.28
Few will mourn the demise of the Payday loan companies who can no longer operate profitably after changes introduced by law. Well, few except those that relied on them to manage each month. Changes in the law introduced recently set a maximum interest rate of 0.8% per day and a cap on certain charges that has dramatically changed the dynamics of Payday lending; but the killer blow is likely to be the overall cap that restricts the total that can be demanded at twice the original loan. So, will those same Payday borrowers who can’t get regulated Payday loans now be forced, as some believe, to use the unregulated market by entering the murky world of the ‘Loan Shark’.
The Consumer Credit Industry is being pushed to share credit data more readily and in real time. This process is likely to happen fairly quickly as it is being promoted by the Financial Conduct Authority (FCA) in an effort to avoid increasing bad debt and unfair practices. The key mantra from the FCA being TFC, Treat Customers Fairly. Access to good credit information allied to best practice and responsible lending is seen as Key to TFC.
Oh how wrong can you be.
Reported in the Guardian, Stella Creasy, the Labour MP for Walthamstow was credited with saying “Guarantor loans are a trap”. First let us say that we support Stella in championing the consumer against usury, and unscrupulous lenders. As a segment most if not all payday loans were probably usury and some lenders were worse than others, but to put Guarantor loans in the same category is not just unfair to Guarantor loans in general but Stella may be doing more harm than good. If consumers are put off looking at structured, affordable, repayment loans as a substitute for very high interest unsecured borrowing such as payday loans, asset loans (eg Brighthouse) then desperate borrowers will still seek Payday loans or worse.