Payday Loan Companies Put to Use as Fewer Borrowers Default

Mon, 25 Jan 2010

Fewer borrowers defaulted on loan and credit card repayments according to a new report from the Bank of England . While lenders expected to see an increase in defaults, the final quarter of 2009 saw fewer defaults, though the amount lost through defaults actually rose during the same period. As a result, banks have since increased the cost of credit card borrowing to restore profit margins.

Lenders have used the threat of defaults to justify the widened gap between interest rates on credit cards and the Bank of England base rate . The difference has remained fairly constant on personal loan rates, though lenders have certainly been more cautious about who they will give loans.

Experts have cited a number of potential factors in the unexpected decrease in the number of borrowers defaulting on debt repayments. The fact that unemployment has not reached the predicted levels has undoubtedly contributed, while other analysts have suggested that the use of payday loans to meet repayments may have helped. Meanwhile, lenders have also been very focused on repaying existing debts, with lenders expecting consumers to continue to exhibit such caution.
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