Lending loans to the ‘right’ people.


Safer lending, no bending (the rules)!

Back in 2008, the devastating financial crisis hit the majority of countries in the world. This, of course, affected millions of people, but it also affected banks. One reason which caused it to happen was because some bankers were lending large sums of money to ‘unreliable’ pripple who could not pay it back.

When loans cannot be paid back by the customer, it not only affects them, but it also has a negative impact on the bank that they take the money from; the bank loses this money.

Figures from the Bank Of England show that consumer borrowing increases by 10% annually. The amount of money borrowd sums up to £197.4 billion(!): the highest recorded level since 2008. This means that if more and more ‘unreliable’ people are given loans, the numbers could keep increasing and increasing up to a certain point which could cause history to repeat itself.

To prevent this, bankers should not give loans to people who cannot pay them back and should check a person’s background thoroughly before lending. This isn’t risky and there is no chance of the bank losing any money. Bankers should check the person asking for the loan, making sure that they are stable and are able to pay it back.

Of course, this still has its downsides. Refusing to give a person loans could impact the one who was rejected, as they might have needed the money urgently to help their family or something of the sort. However, they can receive some help from some other organizations, such as charities. This way, the bank won’t lose money.

Ross is a dad who is financially struggling. Both him and his wife do not have jobs, and are finding it extremely hard to take care of their infant child. They haven’t paid their rent, and it is only a short amount of time before they are evicted out of their home. Ross went to his bank to ask if he could borrow a loan, and because he isn’t financially stable, he was rejected. Him and his family were evicted out of their home, and are now homeless.

This is the risk of lending ’unreliable‘ people money. And checking the person’s background before lending is extremely important. Remember, safer lending, no bending!