People change, circumstances change.
If someone wishes to take control of their debts, should there be loans for poor credit record holders?
From the borrower’s perspective being able to borrow to, perhaps, consolidate a number of different debts into one loan with a single payment is an attractive proposition.
To a lender, however, lending money to someone who has a poor track record is a high risk business. The potential borrower may assert that they have changed but can they be trusted? Why should a lender make loans to people who have poor credit records? Is it throwing good money after bad?
In the financial world, risk is linked to reward. The higher the risk taken, the greater the potential reward demanded. In practice this means that loans for poor credit records holders are expensive, if available.
Since the advent of credit scoring, the process of obtaining a loan has become a faceless transaction based on calculated probabilities. The ability of the personal borrower to put his or her case to the lender is no more. Is this the fault of the borrower or the lender? Probably a bit of both.
The consumer is increasingly shopping around for the best possible deal. It matters not who with as long as the best deal is obtained. That deal is couched in terms of financial cost and not opportunity cost. The lenders in return have responded by minimising their administration costs – reducing the (very expensive) human interface to the absolute minimum. For the vast majority of transactions this works well.
Where it doesn’t work, however, is when the potential borrower falls outside of the boundaries set in stone in the computer algorithms. In these cases, the mainstream lenders are not interested. The reward may or may not be there but they are quite simply not willing to invest the time or effort in even making a more detailed assessment if the computer says no.