Short term Home Equity Loans have served to both help and endanger the financial status of British citizens for many decades, but now, there could be a worrying gap in the availability of short-term lenders and the need for short term loans across the nation.

Major Short-Term Lenders are Quitting the Industry

Wonga was the most prominent name in the segment to go down in 2019 and as all reports indicate, 2020 will see QuickQuid, 24/7 Moneybox, WageDay and plenty of others quit as well. Keeping in mind that these are some of the most prominent names that hold more than 80% of the short-term lending market, they did manage to provide millions of loans to borrowers in 2019.

However, there is likely no way for them to come back from their slump if even such impressive figures are not enough to sustain their business. Whether it’s an effect of strict Financial Conduct Authority (FCA) regulations being implemented, or the pressure of settling compensation claims from former customers, they are most likely going to go out of business for good.

The First Pangs of Short-Term Loan Shortage Felt During Christmas 2019

Last Christmas (2019), the first pangs of the impending short-term loan shortage was felt by those who depend heavily on payday loans, especially during the holiday season. 

There has traditionally been a longer gap (6-7 weeks) between salaries annually, due to the holidays stretching the gap between paydays at this of the year. Hundreds of thousands of people found themselves short on cash last year, because they could not find a short-term lender to help them cope with the holiday expenses and the longer gap between paydays. The numbers are likely to grow to millions next year, when even more lenders close shop and leave the industry.

The Main Question

Roughly four million people need frequent short-term loans if the whole of the UK is taken into account. Now, the question is, where will they find the money which they often need to pay for necessities such as energy bills, phone bills and rent?

Online Lenders Could be Able to Meet at Least Some of the Demands

The new generation of online short-term lenders is going to be the best hope for Brits who rely on short term loans, and some of them may even be better options than their predecessors who are going out of business. For example, short term loan direct lender LoanPig provides an intuitive and transparent platform for borrowers to see the exact rates of interest, EMIs, interest + principle (total payable) and all other details, in relation to the amount they borrow and the tenure they choose to pay it back in. Not only are the new generation of online payday lenders known for lower interest rates, they are well funded and in complete compliance of all FCA rules.

It remains to be seen how much of this deficit is met by the online providers, but there will certainly be a significant gap between demand and supply in short-term loans next year all the same. The situation may eventually become a lot less dire, but 2020 could be a tough year for some Brits.