Who are the main players in the lucrative and fast growing quick cash market?
Of course, there is wonga.com and paydayuk.co.uk, which are online only players. Then there are the main high street companies that also have an online presence. There are also many online brokers like Gimmedosh.com that apply to a number of quick cash lenders for the applicant.
It is interesting to note that there were only 8 or 10 payday lenders offering quick cash in the UK in 2009, which has increased to as many as 100 in 2012.
It was very clear in the past who would rely on a short term payday loan to get their hands on some quick cash to meet a financial emergency. These would be mainly low income families borrowing mainly from door step lenders. But, as the market has grown and with a number of US companies entering the UK on the high street and online, the type of customer has spread to include a wide variety of people, including:
â¢ Low income
â¢ Poor credit record
â¢ Young, over 18, with a well paid job and good credit history, but doesnât want to borrow from the mainstream banks, credit card companies or apply for or use an existing bank overdraft facility
â¢ Repeat custom.
Direct Line Cherry Picking
The sleepy, but rich, insurance industry was shaken up by the likes of Direct Line with their telephone application process from the early call centres in the UK before the advent of the internet. They used the best available technology at the time, removed the commission cost of brokers and cherry picked the least risky customers to grow their business by charging much lower premiums than the established providers, i.e. âcherry prickedâ customers.
The big boys didnât sleep for long and created their own âdirectâ approach to selling insurance to the consumer. One of the big players took over Direct Line and is today still using their brand to sell all types of financial products.
A similar scenario has been developing in the short term payday loans market where the early entrants have been enjoying extremely high interest rates (APRs) due to the lack of any serious competition.
The quick cash lending sector has changed considerably since the arrival of foreign providers and the exponential growth in the number of online providers and brokers in the UK. This has forced interest rates (APRs) down and some of the lesser capable companies have been struggling, as all payday lenders borrow funds from the mainstream money markets at relatively high rates.
They need to recoup the fixed costs, higher rates and the âbadâ debt that invariably some of the loans will become due to the inability of some borrowers to repay their loan by having much higher rates than the more savvy payday online lenders who have been âcherry pickingâ and targeting safer consumers, thus being able to charge lower interest rates (APRs) by reducing their bad debt write offs. Some short term payday lenders perform credit checks, as they wish to restrict their customers to less risky ones that are more likely to repay their debt.
Whoâs to say that after the new Government legislation and control of the short term payday loans sector being introduced in early 2014, the big mainstream lenders wonât jump into the market by either taking over a company like Wonga.com or adding a new âtypeâ of unsecured loan to their already confusing array of financial products!
Most of the quick cash short term payday lenders recommended by Gimmedosh.com are reputable, responsible and have strict criteria for online applicants.