Availability of Personal Loans Linked to Unemployment
With unemployment a problem in the UK and right across Europe and the USA, many experts have been analysing what effects the situation is having on the world of finance and financial products.
Both the UK and the USA have seen a decline in the number of unsecured personal loans on the market. While this has been substantially caused by the contraction of the market in the wake of the credit crunch and the global economic downturn, some analysts have argued that increased unemployment is also to blame.
These analysts point to the fact that, although there are fewer personal loans available than there were a couple of years ago, there has been significant recent growth in other kinds of loan, such as mortgages, car loans and instant cash loans – otherwise known as payday loans. This unusual phenomenon has led many experts to suggest that it is related to the characteristics of modern unemployment.
The argument is that today’s new unemployed were the customers that the providers of personal loans prefer to seek out – but if they do not have an income due to unemployment, then they are unable to obtain credit.
A recent article on US website loansandcredit.com said that conversely, credit cards and payday loans have remained widely available during this period because most holders obtained credit cards before unemployment and can use them to help with household expenses while they are between jobs. Payday loans are not reliant on a credit check and can fulfil a similar function to personal loans.
Champions of this theory have also suggested that the recent increase in home loans and car loans is the first sign that the economy is picking up again. They argue that the reappearance of a large number of personal loans on the market will show that the recession is over once and for all.
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