UK personal loan industry
This industry is responsible for the provision of loans to the interested customers. The individual person who is in need of borrowing some finances is liable to approach a potential lender within the UK market personal loan with an application for the needed money with a high anticipation for the possible approval of the application for the money. The recovery of the borrowed money is achieved through regular payments that are made at intervals by the borrow, payments that covers the recovery of the borrowed amount of money together with some accumulating interests. (Alpert & Howard 2004, p.
564). The current development has been through the use of the internet to make it cheap as well as quick for the arrangement of money lending when the need arises. Secured as well as unsecured loans are available within the companies in the UK that deals with personal loans. The difference being that the former type of personal loan is associated with the attachment of a particular type of a guarantee as well as lesser interests as compared to the latter. The latter is also much faster and are mostly suitable for borrowers who are in need of smaller amounts of loans (Wagenaar 2006, p. 312).
The lenders in the personal loan industry includes some building societies as well as banks in addition to other big lenders with major specialization in the business of personal loans in the UK. Other lenders in this industry include the Supermarkets, other lenders that are internet based, as well as department stores. This variety of personal loan industry lenders has brought some major advantages to the potential borrowers as the rates of interests has been significantly brought down in the industry. The provision for a bargain has also been an added advantage to the borrowers ( Alpert & Howard 2004, p.
67). Government policies as well as regulations are very active as far as the industry of personal loans in the uk are concerned. There is an existence of enacted parliamentary acts as well as legislations that have been incorporated for the purposes of safeguarding the consumers. There also exists the office responsible with fair trading with specific purpose of protection of the borrower in this industry. The aims as well as the objectives of this office are achieved through enforcing a healthy competion as well as enhancing rules for the protection of the consumer.
The office also conducts some market analysis for the proper working as well as a healthy communication channel amongst the consumer, the business as well as the government. This office is also responsible with the administration of Credit License for the consumer. The parliament also passed an act 1974 introducing the “Consumer Credit Act that is the basis of granting the Consumer Credit License”(Barberis & Robert 1998, p. 68). The office is also responsible for enforcing other important elements of this act as well as updating the act.
The act also contains rules as well as regulation that govern the contents of any advertisement as well as the control of the wording of any advertisement relating to the loan industry (Genesove & Chris 2001, p. 45). There is an existence of bills that have had the approval of the legislature that allow for negotiation between the borrowers an d the lenders as far as the rates of interest are concerned However this has no implication for higher rates of interests, an advantage imputed to the high levels of competition that that is brought about by the existence of a variety of lenders in this
Industry. The existence of these policies us of vital help to the industry as there is chances for the opportunities in the future of the industry. This is guaranteed by the fact that the future of the industry depends on the satisfaction of the customers which has already been addressed through the protection of their interests through the use of the government policies as well as regulations. The economic environment is the indicator of the spending level and the exact mode of spending There exist some economic forces affecting this industry mostly portrayed by a deepening credit crisis.
Most of the companies in the UK have greatly been hit by the credit crisis and chances are very high that in the future the impact could possibly be greater as compared to the current situation (Deaux & Elizabeth 2007, p. 163). The crisis is most likely to be a result of a slowdown of the economy. The impact of the credit crisis is compounded by the issue of the country’s dependence on property as well as the industry of financial services for the growth of its gross domestic product, GDP. More than half of the companies dealing with this industry in the UK have undergone a tight
experience as far as the finance availability are concerned which is consequential to the restriction of growth. (Daniel & Avanidhar 2008). Consequently, majority of the companies in the personal loans industry are experiencing some rising levels of loan repayment defaults from the majority of their customers. This in turn brings about negative impacts on the Companies as well as hindering the companies ability for sales increment, the extension of the Companies credit to their esteemed customers, the generation of the company’s external capital as well as increasing the capital cost.
The escalating capital cost accompanied with the requirement for extremely stringent requirements for financing as well as the rising cases of loan repayment defaulters is a true cause for a catastrophic business, a situation that requires that the potential risk are well understood for the purpose of the maintenance of a balance sheet of an appropriately healthy condition. This is a requirement in consideration that the economic environment of the business in the industry of personal loans is highly risky (Varian 2002, p. 321). There was recorded a dramatic decline in the level of the individuals who complied with the
acquisition of credit. The resilient nature of the performance in the economic environment as well as the relatively declining base rate was consequential to the number of people in arrears to be relatively low as well as low employment rates. Personal bankruptcies were consequently increased as a result of this situation. There has been a heightening pressure experienced by the lenders as a result of the efforts of the regulators as well as consumer association in a bid of addressing the crucial problem of the ever increasing consumer debt. This scenario poses poses a great threat to the survivor of the industry as the customers are
faced with a critically hard time in dealing with this economically difficult situation. This is a type of an industry that is specifically sensitive to some form of economic hardships and therefore there lies a great threat to its survival in consideration of a hard economic environment posed to the customers of the industry. (Bremer & Kiyoshi 2006, p. 342). Demographic factors are of major interest in this industry since people are involved and they are the most important aspects governing the success of the industry. Factors of demographic changes such as the size of the population, the population density, the location of
the individuals relative to the industry, gender, the racial aspect of the population, the level of education as well as income, among other factors are all important for the success of the industry. The increase in the population has significant effects on the growth of the industry. However, this increase may not necessarily imply the expansion of market opportunities unless the spending power of the greater segment of the population is enhanced in line with the increase in the population. (Christensen & James 2001, p. 59). The population continues to age with time as families adopt the system of having fewer children as time goes by.
The lifespan of the current generation is continuously undergoing extension due to the improvements in the medical science. There is also increased instances of the retirement of the generation of the baby boom. There has been projected some countervailing forces that are responsible for the mitigation of the adverse effects that are associated with the aging in the population as far as the growth in the economy is concerned. The extended changes in the demographic factors is quite influential to economic development of this industry due to the changes in the demand for services by the people which ultimately affects the
future health as well as the prosperity of the industry this in turn affects the financial investment attractiveness of the personal loan industry. The effect of demographic factors to the future of the personal loan industry in the UK will therefore depend upon the associated living standards of the future generations. If the individuals in the projected future generation will have a low economic base, the resulting effect will be a threat posed to the industry. However if the greater percentage of the future generation will be adequately be well up in terms of spending levels,
then this implies some favorable opportunities for the industry (Fischhoff 2002, p. 33). The society upholds different attitudes values as well as believes as far as the industry is concerned. There exists some forces within the society that governs their perceptions, their preferences values as well as behaviors relative to the industry. Each an every individual has been brought up in a specific cultural environment that is responsible for the shaping of the individuals beliefs as well as values which is the bass of the definition of the relationship of the individual with the rest of the society.
The industry has therefore the responsibility of understanding the activities taking place within the neighboring socio-cultural environmental set-up, considering the dynamics of the societies perception as well as behaviors. It is evident that some cultures are relatively static while others undergoes changes in line with the changes that occur un the society. the culture surrounding the UK personal loans industry faces the influence of the work ethics of a protestant nature characterized by hard work as well as self help and material wealth accumulation the individual people, and therefore the industry is materialistically oriented.
(Barberis & Robert 1998, p. 9). The cultural values that are core in their nature forms the basis of fixed parameters important for the operations of the industry. Cultural values that are of major importance in the society finds their expression of the individuals personal view the society and the view of the industry. The industry has to device some tactics necessary for the attracting the confidence of the consumer for the purpose of its sustainability through such techniques as the support of causes that are worthy as well as increasing its spending on the improvement of public relations (Benartzi & Richard 2005, p.
76). The industry is also impacted by the rapid development in the technological advancements. The environment related to the technological advancement forms the most crucial dramatic force that shapes the destiny of the industry. The attitudes that we hold as regards the issue of technological advancement is determined by what between wonders or blunders impresses as most. Any attempt of the industry of ignorance to a technological change is a true cause of its decline as well as failure.
The occurrence of a new technology is associated with the creation of a new market as well as opportunities. It is through the appropriate application of the benefits of upcoming technologies that the industry becomes in a position of reducing costs as well as the development of other income streams as for an example the use of the internet. The internet has been wisely applied in the industry for accomplishing with greater efficiency, speed as well as ease, the acquisition as well as repayment of loans.
The structure as well as the practices of the Brock, business in the industry have significantly been affected by the changes in the technology, and at the same time potential lenders have adopted appropriate means for the exploitation of the opportunities that have been brought about by the availability of the of the advances in the technology. Apart from the internet, other fields of the advancement in the technology that has had significant contribution in this industry includes automated as well as underwriting. The innovations in technology has had immense influence upon the evolution that the industry has undergone.
It is through the changes that have been encountered in the industry that has resulted to the major improvements that have been realized in the entire process of lending. This has been instrumental in winning the confidence of the borrowers hence accelerating the rate of the borrower’s application for the loans. At the same time the lenders as well as the investors are enhanced with a quick as well as efficient way of servicing , pricing, selling as trading in mortgages ( Beyer & Edward 2007, p. 213).. The provision for the technology of electronic communication for the lenders as well
as borrowers in the industry has made significant progress in the industry. The mid 1990 brought about the use of computers as well as the internet that brought about great changes in the mode of the operations in the majority of the players in this industry. Further progress have been recorded in the systems of the storage, transmission as well as processing the information with a significant drop in the costs associated with these processes (Carhart 2007, p. 34). This consequently has resulted to a significant increase in the profitability of the business
through different ways. Some of the ways that have resulted to the improvement of the business performance include the following; information cost has been drastically reduced thereby lowering the cost of transaction, the demand associated with the connectivity of inter-firm as well as intra-firm has been greatly increased and therefore this has been a major contributor of transformations in the processing of the workflow within the industry (Grossman 2006, p. 67). These kinds of positive changes are consequential to the re-evaluation as well as a turn-
around in the organization of the industry, a situation that that further leads to the reductions of the costs that are associated with the transactions of the industry. The reduction in the industry’s information as well as transaction costs coupled with flexibility in the organizational set-up is a tool allowing for the industry to re-invent techniques of conducting business while focusing all the activities on their line of best performance. The industry is also in apposition for the deconstruction of the structures of hierarchy for the purpose of embracing the advantages of a
workforce that is increasingly connected (Benos 2006, p. 26). The achievement of process driven business operations that is customer oriented, automated as well as collaborative, competitive as well as capable for adaptation is the basic aim behind the adoption of technological innovations in this industry. This is only achievable through a shift from operations that are paper-based to ones that are electronic-based (Grinblatt 2007, p. 53). Conclusion The whole of these analysis of the potential threats as well as opportunities indicate that both are evidently possible in the future.
In the first place the adoption of technological advancements as the chances may arise is one area that the industry is faced with potential opportunities. Demographic changes as well as the changes in the attitudes values as well as behaviors also posses opportunities to the industry. Likewise the existing government policies as well as legislations posses some opportunities for the industry. The economic environment has been positively identified as one source of threat for the future of the industry.
Demographic changes that are associated with low level of income as well low cases of unemployment also poses serious threats towards the survival of the industry.
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