Establishments that provide payday loans are often called direct lenders, as there’s no third party involved here, other than the debtor and the creditor. This is the primary relationship between the two terms, but they have both been party to controversies for years now. In the wake of a pandemic, the scene has changed a lot though, with payday loans or short-term loans becoming even more essential than ever before, as millions lost their jobs. Let’s take a look at how the pandemic has affected direct lenders, as well as the borrowers who might not even have a payday coming up.
Payday Loans without a Payday?
As payday loans are short term debts with very high-interest rates, one has to wonder how someone is supposed to pay them back if they do not even have an upcoming payday anymore. Even before that comes into play, the real question is, will someone who has lost a job and has bad credit, even be approved for a short-term loan?
Ideally, someone without a source of income should not be approved by a payday lender, and neither should they themselves be applying for one. These are not long-term solutions by any means, and it can lead to even bigger financial issues if the borrower misses out on any payments. Unfortunately, a lot of people were left with no choice but to seek an immediate source of money to survive, when everything did shut down for a significant few months. Unfortunately, taking advantage of the situation, immoral direct lenders had given out loans to individuals who they knew were in no position to pay them back.
Even as the economy reopened, a large number of people lost their jobs, while plenty of business owners had to close down their companies on account of incurred debts and bad business. As one can imagine, the direct lenders the UK depended on earlier to get themselves through the lockdown, once again became the only hope for them until they could find another job. As employment is not at its highest point right now, this posed the same problem as before; incurring a high-interest debt without a payday insight. Taking out a new loan was out of the question for many, but managing existing debts and borrowing with a job and bad credit has been a focus for many as they struggle to make ends meet.
The solution mostly came via credit brokers such as Payday UK, where you can review a range of payday loan options and find one that will allow you to borrow without a job. Those that consider this service called Payday UK will notice that they are closely connected to multiple of the most well-reputed direct lenders UK based, and while many won’t allow unemployed individuals, but if you have bad credit, then you can apply. Also, you might be able to find a lending partner that will assist you, particularly if you can find a temporary job.
Together with their lending partners, the credit brokerage has helped people with bad credit find loans that they could then repay over a much longer period. This stretched time period can be anything between 3 months to 3 whole years. However, it is still suggested to take the shortest repayment scheme possible, since short-term loans are always going to be very expensive in the longer term. Also, use the brokerage well to find a direct lender that offers the lowest possible interest rate, in respect to the loan amount and payback period.
Critical Move Made by the Government Saved Many from Financial Ruin
The UK Treasury Department and the Financial Conduct Authority (FCA) had made multiple moves starting in April, which saved numerous Brits from financial ruin. The role of the current government in trying to support a large majority of the nation’s at-risk (for unemployment) citizens with the furlough scheme is commendable and it continues to be active, albeit with increasing restrictions. However, the freeze which the FCA decided to put on pawn brokers, payday loans, and car loans was also crucial. It was compounded by the furlough scheme, making it even more effective than only a month’s relief from repayments would have been otherwise.
Employment rates are on the rise again, as nearly 700,000 people who lost their jobs during the pandemic have been reported as being back in employment as of August, 2020. Not everyone could be helped yet though, and there are hundreds of thousands of people who are still reeling from the effects of this recession. It remains to be seen how much the UK manages to recover by the end of 2021, and what other plans the government has to help its financially devastated citizens find economic liberty again. Payday loans never were supposed to be long-term solutions, but they are still one of the only ways as of now for someone in need of fast cash to get it immediately. Under what circumstances they decide to take it, and how they plan to pay it back is a different question altogether that is still not without its own share of controversies.