The Failure of the Personal Finance Industry Makes Acquiring a Loan Much Tougher These Days

The recession is now well into its third year and not really showing signs of abating. One of the main reasons behind the recession, so it is claimed, is due to the almost worldwide financial collapse that took place.

Some say that the collapse was due to the entire financial world having stretched itself by being far too liberal with lending policy and giving credit to people who had stretched their borrowing capabilities too far. In the end though, the whole thing had to come crashing down, with at least one major institution collapsing and a few of the major banks needing to be helped out by the Government.

So what happened next? So with the financial world in turmoil, the banks had to react in order to get some money back into their coffers. After the bailout, the majority of the banks decided that they would keep hold of as much money as they could so they stopped lending money, creating the 'credit crunch'. Some sold off huge swathes of their business in order to rapidly generate income. Unfortunately, it was too much for some, and several financial operations called it a day.

With over 15 secured loan lenders and several unsecured lenders, the market place was very much a different place three years ago. Today there around 6 companies offering secured loans, 3 of those only coming into the market place very recently. Trying to get an unsecured loan at the moment is nigh on impossible as the lenders have tightened their belts. The high street banks and building societies are only lending to their own customers right now.

There were some quite high profile companies that closed down as a result of the crisis. One of the first to bite the dust was First Plus. Owned by Barclays, it shut up shop just as the troubles began, but was also blighted by the Payment Protection Insurance mis-selling debacle which everyone jumped onto as though it was the last bus home. Along with some other minor unsecured lenders, Welcome Finance was another household name to go. Black Horse Loans withdrew from the personal finance scene earlier this year which left a huge gap in the market as far as tenants were concerned.

The industry is still in recovery mode. Things are not all that better even today and the unsecured market is a real problem. Homeowners wanting a loan of several thousands of pounds are still able to obtain a secured loan assuming that they have enough equity in the home to do so. People seeking loans that are not homeowners will still struggle to find a loan assuming that they are unable to get one from their bank. Interestingly enough, personal loan rates are at their lowest rate for nearly two years, having tumbled earlier this year, which has generated a little competition between lenders.

One of the places where small loans can be obtained are from the Payday Loans Companies that have sprung up over the past few years helping to fill the gap left by the finance companies that closed down. Due to the complete lack of any alternative, these instant decision loans have become very popular.

So will the finance industry ever recover to the heady days of the 90’s? It is hard to see such reckless lending reappear but there will always be a demand for credit so it will be no surprise if a few more lenders start to show up as the recovery strengthens.