Growth in Secured Loan Lending Market

During the month of July, the secured loan lending pulled off a three-year high after going beyond the £30 million mark for the first time ever since December of the year 2009.

Loans Warehouse is the first in United Kingdom to make public a secured loans index in July. It released its first ever results and revealed to the public that secured loan lending increased by 22 percent in the month of June to achieve £32.3 million.

This latest growth in secured loan lending activity is the largest monthly increase ever since November of the previous year, with lending for borrowers with poor credit increasing by 18 percent on the same month.

According to Matt Tristram, joint managing director of Loans Warehouse, Shawbrook Bank improved its secured loan product offering to borrowers with poor credit as the bank declared that they were opening its products initially intended for those with poor credit to a bigger number of consumers.

Moreover, this proves that lenders are exerting a lot of effort to loosen their requirements or standards and the results for August represent the effect of these lenders ever since they joined the lending market.

In addition to Tristram’s statement, David Johnson, managing director of Shawbrook Bank said that it is please to witness that the secured loan market is finally getting bigger and they are delighted to take part in that development. Johnson further said that as consumers gain more hope in entering the lending the market, they discover that mortgage lenders constantly refuse to consider refinances so secured loan products are becoming more attractive to consumers.

Also, it is anticipated that the secured loan market will further grow especially with the expansion of loan product offerings and an increasing acknowledgement from brokers that secured loan products are a practical alternative to the conventional mortgage products.

New Rules for the Good of Consumers Says U.S. Consumer Agency

It is vital that consumers should be able to find the right kind of lenders to have the perfect deal for their personal loans. The United States consumer protection agency has realized this importance and has found a way to make it easier for consumers to compare mortgage deals.

Mortgages come with different deals according to the Consumer Financial Protection Bureau; these fees have different arrangements when it comes to the amount of promo points and fees you can have to reduce your loan’s interest rate. These deals are what make it very difficult for consumers to compare the loans of the different financial agencies.

In the proposed law of the U.S. consumer agency, the mortgage lenders could still offer the promos and fees to clients; however they must show the amount of the loan without the fees and the points.

According to Richard Cordray, director of the CFPB, they want to give customers the best and so it is a must that lenders should provide their deal and give the customer the option to easily choose their own loans.

The new rules that are expected to be followed next year exempt the provision in the 2010 Dodd-Frank financial oversight law. Debtors are allowed to have the decision in taking a mortgage without the fees and points that lenders offer with it.

Regulators are currently soliciting advice on how to make sure that customers will be able to fairly choose deal payments. The mortgage business has been criticized for approving loans for individuals who cannot afford them; this had a great contribution to the economic crisis of the country in 2007 to 2009.

The privilege of presenting and offering customers loans with unjust terms are often within the loan officers and brokers. Also, the qualifications and the standards for loans are different among individuals. The CFPB however, is confident that the new rules that they are proposing to adapt is going to take care of these problems.

Regulation Over Payday Lenders in Texas

According to a recent report, approximately 8 percent of adults in Texas have taken on a payday loan in the past half decade. Moreover, this is one of the several disturbing results in a study conducted by Pew Charitable Trusts. The study emphasizes that the city of San Antonio must progress with plans to improve the laws for lenders.

In addition, the report found out that of the 28 states with the least regulations in terms of payday loans, Texas is one of them. What’s even more disturbing is the fact that most of the borrowers are using high-interest payday loans to pay for their everyday expenses.

In the United States, a total of $7.4 billion every year are spent by borrowers on payday loans and they pay an average of $520 as interest.

High-interest payday loans are supposed have a two-week term, and these are intended to assist consumers in times of unprecedented financial emergencies. Unfortunately, in reality the term is for five months and borrowers do not actually use it for unprecedented expenses. In fact, several of the loans are used to pay for utilities, credit card bills, mortgage or rent.

A lot of borrowers who take on payday loans most of the time end up drowning in debt, and having to refinance since they cannot pay back the primary loans on time.

In the following month, an ordinance that will put limits on payday loans is set to be proposed by the City Council, headed by Councilman Diego Bernal. The anticipated ordinance moves to restrict payday loans to 20 percent of a borrower’s gross monthly income, and restrict auto title loans to 3 percent of income or 70 percent of car’s value. Also, Bernal also wants the ordinance to control the loan terms and interests.

Because of the lack of regulation over Texas payday lenders, the Legislature must address this problem immediately.

Payday Loan House Bill for Pennsylvania

According to CFPB, most loans are for hundreds of dollars and are charged with $15 or $20 for every $100 borrowed. Payday loans typically have a two-week term and fees amount to a percentage rate between 391 percent and 521 percent every year.

Depending on the state law, loan amounts and finance charges can differ. If the borrower fails repay the loan in full by the time the due date comes, then the lender is allowed by the loan agreement to cash the check of the borrower in order to get repayment.

There has been an increase in payday lenders across the country within the last two decades. Moreover, payday loans can now be availed online, with the arrival of new media.

According to the report from PBS during the month of May, almost 19 million US households use payday loans. According to industry analysts, this totals to $30 billion in short-term credit annually. While this is not yet a problem for Pennsylvania, it could be in the near future.

Philadelphia Daily News reported that Republican state Rep. Chris Ross sponsored a House bill that would introduce short-term lending to Pennsylvania, where it was originally forbidden. Ross believes that by doing so, a safer alternative will be offered to Pennsylvanians who currently take on loans from Internet companies that can resell their personal information.

According to John Rabenold, a lobbyist for payday lender Axcess Financial, the House bill is considered to be an opportunity for Pennsylvania residents that would provide jobs and cash for financial literacy programs. In addition, Rabenold said that he is aware there is a demand for short-term credit and there is also a supply for it, but he thinks that there is a cheaper and better way of service.

However, Diane Standaert, legislative counsel at the Center for Responsible Lending, opposes the legislation and said that it is a very bad idea.

Payday Lenders Have a Reason to Increase Rates

Wonga, a payday lender from Britain has made public that they will be expanding their interest lending to small establishments. Though some consumer groups have been opposed to the gesture no one can say for sure that the move will be hazardous to small companies.

Paying interest just to borrow cash is an idea many people will be hesitant to do. Consumers and establishments are willing to pay rates lower than the charges Wonga is offering. A zero interest rate will be very appealing for everyone. However, lenders such as Wonga charge these high interest rates to prevent bad debt expenses.

When payday shops lend money to individuals who may be unlikely to pay off their loans they have to consider the chances that the borrowers may not be able to pay back what they owe. If you think about it is practical for payday lenders to increase their rates for risky borrowers because if they fail to pay the payday shop will suffer. Most of the small companies that apply for a loan in Wonga have high default rates for their loans. The small companies will have to borrow money because if they do not they will die off anyway.

If the small businesses are not allowed to borrow money, their owners will apply for personal loans anyway and will be signing in their business property in the contract; basically it is the same thing.

Government policies should be centered on protecting consumers from negative forces in the environment, not trying to block payday lending to small companies. High interest loans are not negative forces, small businesses do not harm the environment and they do not usually contribute to the worse kinds of pollution. They only belong to individuals who want to engage in the industry.

Preventing lending to these establishments is like killing the dreams of their owners. Also, the prevention of lending to the businesses will be expensive for the government because it would require them to enforce bans which mean more money to spend on forces.