The Origins of Payday Lending

As far back as the 1800s employees have traditionally be able to ask for an advance on their pay-check. However, as this practice became less common, people began to turn to banks and external lenders. The modern day instant payday loans industry largely originated in the United States, with the concept being introduced to the UK in the 1990s, and high street lender ‘The Money Shop’, being the first to open its doors in 1992.

During the recession, banks and creditors quickly toughened their lending policies, meaning people in need of cash – were left unable to apply for a loan or get a credit card. This is where customers turned to payday lenders for emergency cash in times of need. The high approval rates and instant access to funds make payday loans ideal for these ‘one-off’ emergencies. Although some might blame payday lenders for fueling the recession, for many, payday lenders were actually the lifeline they needed when the banks turned their backs on the public.

The term ‘payday loan’ was little known prior to the 2008 economic crisis, and although the worst of the recession may be behind us, short term lending has remained as popular as ever. It’s clear, whatever your opinion on the industry, that payday loans are still very much in demand. The sector as a whole has grown over the last 10 years from a £100 million business into a £2 billion industry. However we expect there will be some retraction as irresponsible lenders are pushed out of the market.

£2 billion might sound like an enormous amount, but when compared to the £200 billion consumer credit industry, payday loans are just a drop in the financial ocean. The vast majority of debt issues in the UK come from credit cards, overdrafts and other lending sources – and we don’t think that all payday loan lenders deserve the blame that gets thrown their way.

Although there’s a few bad eggs out there, Instant Lolly thinks payday loans are here to stay. With new, stricter regulations from the Financial Conduct Authority (FCA), clamping down on irresponsible lenders, the payday loans industry is going through a transition phase  – and we’re all for it. Instant Lolly believes in the principles of transparent and responsible lending and we’re continuously working on new methods of ensuring anyone who wants to arrange a loan with us is capable of paying it back in a timely manner.