2011 is now well underway and some might say that the economy hasn't gone the way (so far!) that most expected it to. A lot of people were expecting a double dip recession, even more so when the Conservatives go to power during 2010. So far however, it has turned out that even though massive spending cuts are now underway, the economy is still actually growing, albeit at a much smaller rate than anyone would have liked.
Recent news has shown that house prices have fallen during the first three months of 2011 across the whole of the UK, but then to counter that, house prices in London are continually rising and if you separate out the month of March by itself, you will see that house prices across the nation actually grew for that particular month. So all, in all, the outlook probably isn't as gloomy as a lot of people would say it is.
How does finance and consumer credit fit into this economic picture then? During the recession, many businesses had to re-think their strategies for lending money to customers. In many instances this involved creating new products, abandoning old ones and in a lot of instances, closing down businesses or at least loss making parts of the business. Out of these re-thinks came the idea of Guarantor Loans. The key selling point for this product to the customer is that you don't have to have an A1 credit rating to get one, whilst at the same time, the interest rates aren't out of this world. For the lender (or business) the key selling point is that a guarantor loan adds extra security for the business and so looks (and performs) better on their books.
With the economic picture slowly looking brighter, you may be forgiven for thinking that businesses will just go back to selling the old finance products which performed so well before the recession. However, there is a problem with that. The problem is that these products are one of the main things which drove the recession and brought many businesses to their knees - they seemed good when things were going well, but when the money dried up, so did the profits coming in.
All things considered I therefore conclude that Guarantor Loans will be around for a long time to come and will mesh nicely into the economy of this year and the next. If market conditions improve dramatically and prime lending makes a big come back then the guarantor loan products simply need to be tweaked to fit back into the market and they should still continue to be a good product for both customers and businesses alike.
George Thistle writes for Guarantor Loans Company and researches into the emerging alternative credit, sub prime and guarantor loan markets.
No comments:
Post a Comment