January is probably the least favourite month for most people financially. It is also one of the best for short term loans companies because so many people need more cash to get them through the month.
As logbook loans companies find, they have a rush of people looking for loans in December because they want to pay for Christmas, and then another rush in January as people look to pay for excesses over the holiday period.
This is why the industry continues to thrive, because there are so many consumers who haven’t been educated on how to budget, or find it difficult not to spend money at times when they should be saving.
Central government help
The UK government is familiar with this and the Money Advice Service has been set up to help people budget. Those that want to improve their finances can use the online budgeting tool that lets them work out how much they spend against the money they have coming in each month.
The government must know that logbook loans and other lenders thrive because they rely on the general lack of education amongst the UK public when it comes to finance. Most people weren’t taught about how to manage their finances at school and this is showing with the need to set up financial charities that offer debt help and advice.
It is predictable that the spiral of loans will continue, with lenders looking forward to July when people will be taking out more money to go on holiday. As usual the worries will come when they get back from their travels and realise they need to pay their loans back. No wonder there are so many repossessions of cars and homes because people can’t afford to pay back their debts.
The Financial Conduct Authority (FCA)will probably put an end to companies being able to advertise loans around Christmas and holiday times. It gives consumers an incentive to take out a loan to pay for something short term. It is often hard enough for people on low budgets to see holiday adverts, let alone being exposed to more adverts encouraging them to pay for their holiday with a loan.
Ling term thinking is best
Short termism needs to be discouraged when it comes to financial issues. When people become used to taking out loans on a short term basis they find it easy to take out loan after loan as a quick fix. This can leave them in difficulty in the future, because the debt adds up. A loan that started off small has turned into a mountain of debt that can’t be paid off. Even the loan companies don’t benefit because if the borrower can never pay back the debt, the company can lose much of it’s initial investment.