Credit Crisis, Payday Loans And Borrower’s Ability To Borrow
The current world crunch crisis and how it affects people's ability to get through till payday
The Recession is officially here. Mervyn King, the Governor of The Bank of England said in a speech recently, "It seems likely that the UK economy is entering a recession."
However, the credit crunch and the recession, while related, are two different things. Effectively a recession is far worse and is the result of the credit crunch not being handled well. Therefore, if the credit crunch was tough, how much harder will this be?
The effects of recession on payday loans and borrowers ability to borrow
The ways in which the man on the street has been affected by the credit crunch are almost too many to list. The majority of us are finding it harder to get through the month until our next payday without cutting back significantly on our spending or dipping further into our credit accounts.
Payday Loans are also increasing in popularity to fill the gap between the middle and end of the month with some people even using them for basics such as food or utility bills. We've seen increased prices too, the most worrying and well publicised of which have been grocery shopping and fuel.
There are many reports that organic foods are also being shunned in favour of cheaper, more commercially grown alternatives and the price of basics such as bread and eggs has risen by as much as 21 percent in the past year.
Credit playing hard-to-get payday loans due to credit crisis
After years of easy finance, it's also quite distressing to find that you're turned down for a much needed loan or credit card. Over half of all applications are currently being turned down by mainstream banks and building societies.
The tighter controls are to restrict sub-prime borrowing. Sub-prime borrowers are simply people who are more likely to get in to bad debt based on their lifestyle and credit score. As such, most lenders are picking the most reliable borrowers they can find in an effort to restore integrity to the markets.
As well as Payday Loans, mortgages, and credit cards being tough to get hold of, traditional 'over time' can be too as corporations cut back on spending and try to lower the cash in pay packets. Some companies are reducing bonus packages and others are simply letting their workers 'go home early'.
This is especially common in the leisure industry where most workers are paid by the hour, and sadly, empty restaurants and bars mean less work. Holidays abroad will also prove scarcer in the coming year and it's thought that the leisure and entertainment industries will also take a battering as we try to hold onto our pennies.
Even fashionistas who usually rush to designer stores when payday rolls around, are tightening their diamante purse strings. There is some good news though, the fall in the Bank of England's Base Rate will have an effect soon and we could see changes to mortgage repayments. That's a small glimmer of hope?
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