Safer Lending From Banks.

The Financial Crisis was the terrible problem of banks lending money out to people that can't pay it back. This is due to the fact that too many people asked for loans for various reasons (business start-ups, houses etc.) and the banks not being paid back and having to close down businesses, self-employed or not.

In order to prevent another financial crisis, it is my belief that banks should be more careful about who they lend money to. If they lend money to someone who can’t pay it back, the bank will lose more money. I realise that the greater the risk, the greater the reward, but that also means that the greater the risk, the greater the loss. I believe the loss outweighs potential gain. This is because the more people that don’t pay their loan back, the more likely there is to be another financial crisis will happen. I do think it is safer to increase regulations on money lending, as we have still not fully recovered from the 2008 financial crisis, so another financial crisis would just add to the problems.

There is a growing level of concern that people are taking on too much debt. Traditionally, when we look at who has unmanageable debt, we think about the circumstances of the borrowers — why did they borrow that money? But I think we also need to ask why banks lend it. At a simple level, there is a good motivation for banks to make sure they only lend people money they can afford to pay back — if they don’t the bank makes a loss. This security ensures that money isn’t being given to people who may not be able to pay it back. In order to manage this, I think banks should ask for proof of wage and proof of financial history, so they can tell who is likely to pay it back and who isn’t. Banks shouldn’t lend money to those who can’t repay it.

If people don’t pay back the loan, I think the bank should be able to take you to court and reduce your wages, even if you just pay back £1 a week, at least then you will be contributing back into the economy you have potentially damaged. Initial loan documents in 2018 indicate that the lender (a bank) reserves its right to take any action allowable by law to recover money you owe. Failing to pay your loan is likely to trigger a demand for payment in full. But how can we manage this more efficiently? The way to manage this efficiently is to give proof that you are going to pay it back and follow through on your agreement.