A financial disaster may often give rise to an immediate cash injection. In this article, know how LoanTube can help borrowers in good and bad financial times. ⭐Read Facts ⭐Apply Online ⭐Borrow wisely
It’s been ten years since the biggest economic shock around the world since the Great Depression. Did you know that the recession we went through in Britain between 2008-2010 was the worst recession in nearly 150 years? It had a knock-on effect on us all – wages fell behind inflation for years and savers have never had a worse return in the history of the country than they do now.
One question we get occasionally here at LoanTube is why do economic downturns and recessions make it tougher to get loans, mortgages, and credit cards? In this article, our team run you through:
- what an economic downturn is and what a recession is
- the reasons why they happen
- why there is less lending during an economic downturn or a recession
- the effect that an economic downturn or a recession have on your chances of borrowing
- how LoanTube helps borrowers during good and bad economic times
Economies and how they’re performing are measured using something called GDP – that’s short for Gross Domestic Product.
GDP is a figure and you work out GDP by adding up the total amount of goods and services sold during one year in a country like the UK. Politicians and businesspeople always want GDP to go up every year.
The reason why GDP growth is good is that, if businesses and people are buying more goods and services from companies, then those companies become more profitable. That means their employees receive pay rises because there is more money in companies’ bank accounts.
When people and companies are doing well, they feel more confident and they tend to borrow more money. People borrow money to buy houses, cars, and things for around the home and companies borrow to expand, buy in new machinery, and move to larger premises.
The thing about debt is that debt is not bad if you can afford to pay it off. If the economy keeps growing and people and companies are earning more as a result, they’ll actually have more money in their bank account to service the loans, mortgages, credit cards, and other financial agreements they’ve taken out.
If the economy does not keep growing, then the amount of spare cash that people and companies have stays the same so more of their spare cash is used to pay off their loans and credit cards. That means they have less to spend elsewhere and that has a knock-on effect on other businesses. We all start to feel the squeeze – companies don’t expand as quickly, they don’t buy new machinery, we don’t spend as much in the shops, and so on.
Sometimes, as a country, we borrow too much – “we” means us as consumers, businesses, and the government. Most of the time, economic slowdowns are temporary and the economy picks up again – we can get back to having a good time! However, sometimes it doesn’t.
If GDP shrinks, we have less money to spend anyway and, if we have taken out too much debt as a country, it becomes harder to make the economy grow again because people, companies, and the government don’t have the money they need to kickstart economic growth. If GDP shrinks for 6 months or more in a row, this is what’s known as a “recession”.
Sometimes, recessions can be really deep, just like the recession we all remember in 2008-2010. Everybody had just borrowed too much money and the problem was made worse because banks in America and Europe lent borrowers money against property and that property wasn’t worth as much as they thought it was worth. At the same time, because the economy was slowing down, people couldn’t repay the loans on their mortgage or their credit card bills meaning that the banks lost tens of billions of pounds because people defaulted on their credit accounts.
In normal times, they’d just sell the homes they had lent money on but those homes were worth a lot less than before. That made their losses even bigger.
When you go to a bank or a finance company because you want to borrow money, the banks or financial institutions will get the money they lend you from one of two places:
- from savers who have deposited money with them, and
- from institutions who manage money on behalf of others – like pension funds, hedge funds, and so on
When a recession happens, the institutions which give banks the money they lend out get nervous. They often stop giving banks and other financial institutions the money until they’re convinced that the bank or financial institution is stable enough and that it won’t go bust like Northern Rock and Bradford & Bingley did here in the UK.
It’s not that banks and finance companies don’t want to lend money. Because these institutions stop giving them money to lend out, banks and finance companies can’t make as many loans as they could before so they tend to become very cautious about the people they do actually lend money to.
During an economic slowdown or a recession, you will find it harder to borrow money from banks and other finance companies. Don’t worry – everyone does so it’s nothing personal to you.
There will be options out there but they will be harder to find. Every lender has a “borrower profile” – think of that as a target customer. They feel happiest lending money to customers whose personal and financial circumstances most closely match their borrower profile.
You’re always going to have a much better chance of borrowing the money that you need when you know that the lender you’re applying to is looking to lend money to people like you. But how do you know which lenders they are?
The problem for borrowers is that lenders do not often publish in great detail what their ideal borrower looks like. For example, some payday loan lenders might be happy to lend to people whose income is £15,000 a year whereas other payday loan lenders would not consider anyone who earned less than £16,000. There are dozens of things that a lender looks for in applications from borrowers and they tend to say “yes” to borrowers whose personal and financial details are closest to their ideal profile.
That’s where LoanTube comes in. We have direct relationships with dozens of personal loan lenders and we know each of their borrower profiles. That means that, when we receive your application, we know exactly the lenders we should introduce you too.
Within seconds, you’ll get your answer – “yes” or “no”. If it’s yes, then we’ll show you the best offer we’ve found together with the information you need to make an informed decision. If you decide that you want to go ahead, simply sign the form online. Once you do this, a new relationship between you and the lender will be created and, depending on who you bank with and the lender’s internal systems, you could have your money in your account within the hour.
To start your application process, please click here.