Gimme Credit

This isn’t a manifesto, nor a betrayal of any allegiance to political or belief bias, it’s just a rant…

When I was in my early twenties, I crawled on my hands and knees to the bank to apply for a loan to purchase a second hand car. I needed it, because I was starting a Postgraduate Teacher Training year at a college thirty miles away and it would enable me to live at my parental home once again for the year and get to my teaching practice schools. The arguments I had to put forward to my own bank, with whom I’d had my undergraduate account, were well put, but still they would not agree. I therefore went to another bank, asked, justified my request and got a loan. It was to be payable back on a monthly basis at about £50 per month, which then would be covered partly by my grant (remember them?) and any additional income I would be able to get through bar work and guitar tuition.
OK, not the most scintillating piece of autobiography, but it will help me make a point about society today, and that is, what the hell are we doing?
It will not have escaped notice the increasing number of units let in the high streets to short term loan companies and even credit-based purchase stores. What these institutions have in common is they thrive on lending people money they don’t already have and then receive back far more over a period of time than they lent out in the first place. By ‘far more’ I mean it. The interest and APR rates of these business models is obscene. We are talking in the region of between 3000 and 4000% APR for a twelve day loan (just based upon some snapshot surfing I have just done).
Now, I am not criticising the short term loan businesses themselves, although I’m sure I could, but I have long since given up on attacking those who see an opportunity and stay within the law – they have a living to make after all, even if the ethics of their enterprise might be open to debate. I am, instead criticising two other groups of people: the legislators who allow this exploitation to occur, and, frankly, the vulnerable public themselves.
We have an economic development progression path that seems willing to compromise the most vulnerable in order to thrive itself. In the case of short term loans, we are talking acute money management problems, where the consumers have obviously not been able to manage their finances in a stable, forward-thinking way. The issue here is that throwing a short term fix, does not increase their wealth, instead it compounds a debt owed and means more of their future income simply gets wasted on meeting the cost of the finance. APR rates were brought in so comparisons could be made between different arrangements. These days, however, it seems many people are ignoring them.
Despite the attestation of most of these companies that have sprung up offering short term loans (sometimes euphemised as ‘Til PayDay loans’, that they are committed to ‘Responsible Lending’, it is clear that they are not committed to ‘Responsible Living’. Credit card APR, offering a month’s grace on payments, can vary too, but their APR rates are more like between 7.9% and 29.9%. One problem though is that many people find themselves unable to qualify for these. Instead, if they have overspent, their alternative, short of going to illegal loan sharks, selling items of worth they have or turning to crime are to experience a jump of APR hundreds of times what they could have had.
Paying off something on the ‘never-never’ has been a facet of British life for many decades, it enabled people to purchase the basics which helped quality of life and, indeed, enabled life to develop. Signing up for a responsible arrangement of loan, which involved invariably setting out a plan of putting some money aside for the purpose of repayment, was at one time confined either to necessities such as white goods and furniture. It became a popular concept for people to own their own homes so mortgages were developed, and over time people wanted cars, to have holidays, pay for weddings etc. All of these were perhaps classed as impossible really to have saved up before you needed them, so the loan industry enabled products to be developed to enable these to be paid for.
However, today it seems, despite being in times of austerity, people are being offered the options of purchasing credit for whatever they think they want, of desperately need to pay for, but, rather than wait a little longer, they can have it now. The repayments are split up into deceptive bite-sized chunks, which seem manageable, but, all things considered, mean the amount of money people have to have parted with is exponentially more.
People therefore seem to think that they can purchase a luxury good easily, have it in their house today and everything will be OK. Wherever they buy from, in the case of short term loans, they could simply wait a few months, save up the money they would have paid for the loan and still end up with the same, or even a better product. No surprise there to many people, but the fact is that the people being targeted with this industry are those who most likely can least afford it and could do with the extra £30 they could save if they had been able to wait for half a month. If people cannot be encouraged to manage their finances responsibly, then sadly we will end up with a greater proportion of the country serious debt, even though those lending the money are benefiting the economy.
The same goes for hight street credit store arrangements. I have seen people pay out three times what they needed to for a printer, just because the salesperson talked them into a useless three year warranty. Printers are now hardly worth repairing if they go wrong anyway.
Today’s market is such that if one can be bothered to look around, there very often is a better deal. But many people stick with what they have. Most people have commitments every month beyond rent/mortgage, power, water, landline phone, council tax and food. Mobile phones, once considered luxury items, are everywhere, even when people have landline phones. Satellite Television thrives, even though a ‘free’ service is available (License fee applies of course). Both of these extras to life, are usually subscription models, whereby a certain amount of money is paid each month for the product. Yet, we have difficulties comprehending that travel anywhere by motorised conveyance will cost money, whether it be rail, motorcycle, taxi, bus or private car. The cost of living is heavy for people, and adding yet another drain on financial resources is not going to help stability in the future.
We are, indeed, an economy that is built upon living beyond one’s means. Even our government borrows in order to finance itself. All through this, of course, certain entities seem to be benefiting, able to survive and therefore remain integral to the global economy, when beneath it all, individual people essentially suffer and will continue to suffer, led into the illusion that the consumer society is a good thing.
In developing countries where values are perhaps more centred upon the extreme basics needed for life, if these exist at all, I shudder to think what would be thought if people knew exactly how selfishly we behave. We are a society who believe we have aright to spend on luxuries and have the basics provided for us in some way. The concept of education being totally free is still a dream for millions of people around the world. The fact we have some people who simply cannot be bothered to take the opportunity offered to them does nothing to help the economy or life in general. There are genuine cases of need in our country, yes, but there is also an underclass, increasing in number, who are willing to take advantage of what it provided and do not take a responsibility to fit into society. The trouble is, it is not ‘PC’ to say this – and we are so far into it, that it is going to take decades to get out of if we ever get it right.
What has caused this? In my opinion, although the real answer is complicated, it is the unethical selfishness of society. We are all to blame in part as well. Many of us are content with tolerating the suffering of somebody else, as long as they are distanced from us, whether it be in another local area, or over the sea.
Yet, despite hardship and poverty, we still, as a society, prize certain things above others. Most of the things people overspend on are hedonistic – luxuries that could be waited for, or done without. Yet, ironically, some things that provide more of the fabric of society, such as educational experiences, are not considered.
If we developed the same attitude we have for the acquisition of luxury goods to developing ourselves throughout our lifespan with experiences that stimulate and move us forward intellectually, physically and creatively, we could do much to improve the general ignorance of society. If we were actually encouraged to add credit to ourselves, it would be better than allowing people to be encouraged into debt. How is more complicated, but it does seem that we are at risk of destroying any sense of true value and common sense for certain sections of our communities.
The first loan I took out mentioned at the start took me two years to pay back, and in my first years of teaching, it was honestly a struggle to pay it off – I was, after all, trying to keep a car on the road!