Access to loans and other forms of borrowing can be a good thing, an industry expert has claimed.
Speaking at a fringe meeting at the Liberal Democrat party conference, Stephen Sklaroff, director general for the Finance and Leasing Association (FLA), said that the availability of credit. Including personal loans and overdrafts, can hold benefits for society as it allows a wide range of people take advantage of the strength of the expanding British economy. However, with the recent credit crunch taking place the FLA director warned that prospective borrowers need to ensure that they are always in a position to make loan repayments.
He said: “Recent market events should not cause us to forget that readily available credit is a force for good. It spreads the benefits of a growing economy throughout society. The credit industry uses effective data sharing to ensure we lend responsibly. But consumers, too, must be responsible borrowers. Better financial education remains a high priority”.
Also appearing at the meeting, Teresa Perchard, director of public policy for Citizens Advice, cited the need for more financial education to help Britons adopt a more responsible attitude to loans and other areas of their money management. She commented: “We need to build a healthier climate in which people have the understanding, skills and confidence to deal with money matters confidently.”
Meanwhile, Ms Perchard reported that loan lenders and other financial services providers need to do more to help people struggling to pay off their debts manage their money and to make sure those consumers who do apply for a loan will be in a position to keep up with repayments. In addition, she asserted that people are developing difficulties not only in meeting demand for payment on loans, but also for day-to-day expenses.
“There is worrying evidence that while many have enjoyed the benefits of the credit boom, a large and growing number of people continue to pay the price, becoming overwhelmed by serious debt that can have a devastating impact on their lives,” the director added.
Vince Cable, Liberal Democrat economic spokesperson, also claimed that the number of people looking for help with their debts or filing for bankruptcy “has been rising steadily” for some time. However, he suggested that such people could be “just the tip of the iceberg”, as he pointed out that millions of Britons state that they struggle to make repayments on personal loans and all the other demands on their finances.
Those consumers who previously have had problems successfully managing their debts in the past, could well find that their credit file has been damaged so much that many mainstream lenders will not offer them a competitively priced loan. As a result, such people may wish to consider taking out a bad credit loan as a means of getting back on their financial feet. Last month, Neil Munroe, external affairs director for Equifax, reported that while having a history of bad credit can present difficulties for consumers in later life, they should “own up to the debt” as loan lenders could be more willing to help them establish a more affordable loan payment schedule.