Loan Sharks !

Lending money has always been a risky business and the higher the risk the more the rate of interest will rise.  At the moment, the world money market is offering an exceptionally low return for savings deposited at the banks and consequently house mortgages are at the low end of the usual debt cycle. Borrowers are warned that a return to normal levels can occur with little notice.

This is probably a very good time for major corporations to seek a loan to expand their business. Unfortunately, demand for loans is fairly stagnant because a mood of caution prevails in business circles.  Many are waiting to see how self driving cars and the development of artificial intelligence will change the market place and impact pay levels.

What never changes is the needs of societies lower strata to borrow money to eke out daily living expenses.  A century ago that was served by pawnbrokers shops.  The borrower presented something of value and the pawnbroker advanced a loan representing a small portion of that value for a nominated period of time and at an agreed interest rate.  If the customer repaid the loan on time they reclaimed that item, and if they didn't the pawnbroker was free to offer it for public sale for near its true value.

The pawnbroker trade fell out of favour and was replaced by small lending agencies offering personal loans.  Desperate people were forced to borrow at usurious interest rates and the trade was closely connected with underworld enforcers, who often used violence to collect payment arrears.  Often the same borrowers kept adding to their debt until it reached unmanageable proportions.

Credit entered a new age when the Australian banks entered the Bankcard era.  New credit cards were showered on the population, which quickly divided into those who could manage debt and those who could not. This new debt vehicle quickly replaced the " Hire-Purchase " system, colloquially termed the " never-never " !

In recent times the fast loan business has emerged with the new titles of " Pay day loans " and " Money recyclers ".  These are shop front businesses which either dispense cash on credit or offer to buy goods at a fraction of their price in similar manner to the old pawnbroker trade.  They are subjected to government interest rate legislation.

Now we are facing a new enticement.  Machines - similar in appearance to the banks ATM's - are appearing in retail premises which offer on the spot loans.   The borrower needs to enter identification and if accepted the machine dispenses a credit card with the agreed loan value embedded in its operational chip.  The offer runs to loans of a thousand dollars.

There is a danger that the ease with which money can be obtained will see debt roar out of hand and ensnare the population percentage who are susceptible to turning to money lenders to finance their weekly shortfalls.  The credit rates charged are always onerous and debts can quickly become unpayable.   This form of credit has moved beyond providing financial assistance.   It is fast emerging as a money trap from which the unsuspecting can not hope to escape.  Banning these machines is simply saving vulnerable people from their own poor judgement.