The Infamous Trend Of Installment Loans In The UK

• What does a person resort to when cost of living rises but wages do not?
• How can a person really borrow if he cannot afford to pay it back?
• Whom should a person look up to when banks refuse their loan application?
• How do you improve your credit score when you do not have money to survive?

All these questions lead to just one answer- online instalment loans (also known as 12 month loans).

Since 2012, UK citizens have been unable to pay their grocery and credit card bills at the end of the month. Their salaries fall short while adjusting to inflation and standard living costs. This trend has resulted in massive proliferation of short-term lending market.

From July 2017 to June 2018, the total value of unsecured loans availed by the UK citizens was nearly £192 billion. The average debt per borrower was calculated to be £9,570. This is not a small amount for High Cost Short Term Credit (HCSTC) finance, especially when the average salaries in the UK, 2018 were recorded to be somewhere just around £28,000.

 There are 3 major economical reasons that drive people to borrow money. They are not new and have been prevailing in the UK since a decade now.

1. Uprising of Gig Economy
2. Zero- Hour Contract Culture
3. Disproportional Wage Growth

A serious discussion of each entity is required to understand the existing situation.

Based on a report published by Deliotte, about one-hird of the UK workforce will be a part of the gig economy by 2020.

Uprising of Gig Economy

When you search for ‘gig economy’ on your browser, some of your top search results include articles on temporary work and sharing economy. And that is exactly what a gig economy is comprised of.

To be elaborate, you are hired as a contractual worker to work flexibly at your own terms. You work as an independent contractor or a freelancer, but stay employed by a company. You are paid in proportion to the work you do through the week or month, and are not obligated to a fixed wage.

Take Uber or Lyft for example. Each driver associated with the company is free to operate at his own will. The number of hours and days is completely dependent on the employee, and the more he works towards increasing his earnings, higher is the profit for the company. A report by Deliotte has made a staggering prediction regarding the UK workforce in 2020.

This is a setback for the conventionally operating economy that had its foundations based on full time workers and fixed wages. The line between permanent and self-employment has gone blurred since the introduction and acceptance of a gig economic culture.

The people working with these gig-economy driven companies are neither fully not self employed. The earnings are not certain for an engaged worker, and he or she is forced to borrow funds at the end of the day.

Based on a report published on the website Statista.com, 883,000 people were employed on a zero-hours contract in the UK till June, 2018.

Zero- Hour Contract Culture

Being employed under a zero -hour contract means that your salary depends completely on the discretion of your employer. There is no pre-defined or guaranteed minimum number of hours that you need to work for.

The emerging and popular freelancing culture is the main promotional factor of zero-hour contract. You remain at the beck and call of your employer, and your salary is completely dependent on the fact whether he needs you or not.

In such a scenario, instability is high and it gets highly difficult to pay all the monthly bills. These contracts have been a big reason behind the huge increase of unsecured lending.

These self-employed workers account to nearly 15% of the entire working population in the UK. To get your facts straight, there was an increase of 800,000 self-employed population as compared to an overall increase of 3,000,000 workers between the period of 2010 to 2017.

If an article published by BBC were to be believed, the Bank of England said in August 2018 that it expected total pay to grow by 2.5% per year by the year end. This was in contrast to a 2.7% inflation rate during 2017-18.

Disproportional Wage Growth

Consider the statistics published by the BBC regarding a 2.5% pay rise by 2018 end. Despite a visible rise in wages across the UK, the income inequality does not seem to go away. The increase in wages does not seem to cope with the rising living costs.

Houses have become more expensive, affording a decent education does not seem to come easy, finding a permanent job still seems like a dream to many and it is becoming harder to play catch up.

The people get tired at some point, and resort to easier options. When the online lending community approves their loans without creating more hurdles for them, financially troubled people are bent to go their way.

12 month loans show them a way to repay their bills in hand and then go on paying back their debt piece by piece.

Though the employment figures are at an all time high and inflation seems to go down a little, a somewhat stagnation of wages is still prevalent in the society.

The Trend of Instalment Loans

It has been a decade now since unsecured short-term loans are acting as helping hands to the borrowers facing temporary financial hardships. It has been understood that every money problem can be sorted through an instant loan.

Installment Loans for Bad Credit Direct Lenders  provide comfort and flexibility while borrowing money. A longer repayment plan gets converted to smaller instalments. Neither does your credit score matter, not your monthly salary. These loans are an amalgamation of all your financial solutions.

At the end of the month, groceries have to be bought and bills have to be paid. It does not matter where the money comes from or whether you are employed or not. While you have the freedom to choose your line and type of work, your bills might still remain unpaid.

According to a recent study, 54% of the unsecured lending is taken to pay for food and regular groceries. Not just that, 49% of short-term loans are used to pay housing rent.

When people are unable to afford even the two most basic necessities of life (food and shelter), it is not difficult to understand the ongoing situation of the financial market.

The economically driven market trends do not necessarily comply with the needs of the people. The disproportionate increase or decrease in the wages and living costs force people to borrow money from outside sources.