Call me an idealist but...

accountingbod

with all the reent threads about PDL's recently, i can't help but be truly worried and upset about the state of borrowing in the UK.
I'm not writing this from a judgemental perspective because people have their reasons and i'm not one to judge how they source their financing.

Is it too much to start up a short term loan company that doesn't prey on people with extortionate interest rates and default charges but instead set up a company that works in the interest of people?

Of course, the main thing here is risk i suppose. People go to these a lot of the time because they can't borrow at normal rates due to credit ratings, risk of default etc... but not always of course.

In an ideal world, no-one would have debt or pay off their cards in full each month and yes the key thing probably is education. But until the ideal is achieved (if that will ever happen), is it such a bad thing to become socially responsible and set something up that takes these badboy companies out of business?

I can't remember it exactly but doesn't George in 'It's a Wonderful Life' operate some kind of people's mortgage company?

I dont know if any of this makes sense really and perhaps the banks already charge a reasonable rate on normal loans and i must admit i am naive about what may be out there already that offers this service.

It's really about the fact that it really upsets me that companies like this get away with this.

I think there should at least be a cap on what interest rates can be charged in line with base rates or something!

Anyone got any ideas as to how a 'fair' loan company can exist that both protects itself and doesnt take advantage of those it serves?

Rant over...

somethingcorporate

What makes you think PDL companies do not have a place in the overall structure of lenders? surely they are better off with a company that has to play by some rules rather than a loan shark that will take your ability to walk away if you do not pay.

At the end of the day, they offer a service - if there was no demand for it they wouldn't exist.

I do agree with your utopian ideals and you make some valid points. If you have a bit of cash why not try setting up the first ethical PDL lender - I agree there is a gap in the market here that COOP fill further up the banking chain.

KingElvis

Becuase if you open a low rate / high risk lending operation you'd be dead in the water in the first few months....people have to borrow at those rates because they have proven themselves....ahem....challenged when it comes to things fiscal.

Welcome Finance tried to cpature the high risk market and look what happened to them, the ended up at the mercy of their "clients" unreliablity and now they are themselves in default.

A fine idea but a complete non starter.

CLAPTON

credit unions do this sort of thing at resonable interest rates but normally insist you save with them first

but if you are going to lend to people who never bother to save and are likely to not make the repayments then you either go bankrupt were quickly or charge very high interest rate

Tixy

Banks will lend to people who they believe will repay and are at a low risk of defaulting. They don't lend to people who they think will default.

Payday loan companies will lend to those that are not accepted by banks. Because of the very high risk of defaulting the cost of the loans to the borrower isvery much higher, to compensate for all those who will not pay their loans back. Whilst the costs are high, these are short term loans, and whilstever people continue to take them out the market for them to exist and charge that level of costs will continue. If nobody borrowed from them at that cost, maybe they'd bring prices down, but there seems to be no end of desperate people out there lining up to be customers of payday loan companies.

'Short term loan company working in the interests of people' - credit unions certainly in part already fit the bill for this, they are ideal.
People become a member of the credit union when they start save, and are then offered loans at an ok APR. They are not as cheap as banks, but are many times cheaper than payday loans. Usually the first loan a person is allowed to borrow is limited to a fairly low figure, if they pay that back on time each month they are then allowed to borrow more. Some credit unions will even lend to people as soon as they join before they have built up any savongs.

accountingbod

Worthy points from all of you and i accept that my idea is fundamentally flawed but i cant stop thinking about it.

Something corporate - i think they do have a place in the overall structure. my thoughts were stemmed more from other posts on here that leave me feeling like i want to do something to improve matters/offer a better service.

If i did have the money i may well try it to be honest even if it is a fool's folly.

Utopian yes, non-starter yes but alas I am a dreamer!

dealer_wins

I think this current frenzy with PDLs will die down in a year or 2. There will come a point where a critical mass default and will no longer be accepted, and there wont be enough new clients to take their place and keep the profit coming in.

I still think that most people in this country are too sensible to borrow at 1000s of %.

Bit like the "we buy your gold at 10% of its real value", all the muppets have sold their gold by now.

accountingbod

Good points Tixy and thanks for the info on the credit unions.

I'm going to go away and work on something revolutionary for a while until i realise that it probably just doesn't exist!

Tixy

accountingbod wrote: »

that leave me feeling like i want to do something to improve matters/offer a better service.

Join a credit union? start a credit union in your area? help publicise and advertise credit unions?

Many many people who resort to payday loans in a genuine emergency and fully intend to repay the loan could benefit from using a credit union instead.

Those that use payday loans to fund nights out, or who never had a coherent plan as to how they will repay their loan, or simply have no intention of doing so probably won't get a loan from a credit union in the first place. But then its better if those people have no access to any credit anyway.

accountingbod

lol dealer wins..

Speaking of which, i was heading in to London the other day and at Victoria there was a cash for gold service which was offering the 'best rate' of about £20 a gram (i think it was grams)
Needless to say, a short trip to Woolwich later, there was a shop on the street offering about £32 a gram or thereabouts...

accountingbod

You're right Tixy. I think i will look in to it as I have realised it is something that i would like to be part of. Thanks