Payday Loan Debacle Making Space For Credit Card Companies To Expand!

Sub-prime market is blossoming, thanks to growing element of desperation among the

consumers who have switched to credit card products in the wake of insufficiency of right kind of financial instruments. However, these products (referring to credit cards here) available at exorbitant interest rates (as high as 60 percent) are making life more difficult for people already in distress.

Here, in such times, providers' promotion policy have been purposely aimed to convince people having bad credit history or for those whose loan pleas have already been rejected by high street banks and other prominent banking/lending entities.

Interestingly, people are opting for credit cards despite being in knowledge of the unreasonable interest rates and additional charges & fees, they levy on users. But they don't seem to have any other option. Reason: Presence of the short term loan product in the UK lending industry known as payday loans. However, ironically, lenders dealing in payday loan products have failed to capitalise the surging demand for it in the right way. Obviously, the next question that comes in mind is WHY it is so? The answer to this query is very clear yet, is baffling at the same time.

Driven by the principle of 'mindless profiteering', payday loans providers are making lives difficult for commoners. Post liquidity crisis, people in large numbers turned to credit help for meeting all their ends and ended up making their lives even messier. Since, lenders of payday loans were found guilty of charging abnormal interest rates from their borrowers. People might find it hard to believe but it is the harsh ground reality that nobody can deny.

Payday loans, which are known for their quick availability and no credit check feature, have always withdrew flak owing to their association with high interest rates factor. Although, from time to time, the issue of high APRs have stirred controversies yet their rising demand has overshadowed almost everything.

Meanwhile, the situation in sub-prime market is even worse. Insufficiency of genuine people who can chip in with their efforts to better the situation, is also adding to the woes. Moreover, such situations are aiding the chances of mismanagement of debts from borrower's end. With interest amount racking up and hidden charges and fees making life more difficult, people are resorting to comparatively cheaper version of arranging immediate finance i.e., credit cards.

In the process, the equilibrium is disturbed, leading to a situation where imbalance has put more pressure on the other financial instruments. This, by any stretch of imagination, does not augers well for the UK economy especially after knowing the fact that it is still making its way out of depression.

Hence, it is extremely important to strike a fine tuning between alternative forms of financing. And as of now, it should be done between payday loans and credit card products.

by: Thomas Otway

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