Unless you have failed to pick up a newspaper in the last four years, you will be aware that bank lending to both consumers and businesses has plummeted.
Despite various measures designed to ease the flow of credit, the truth is that for many people it has never been more difficult to access funds from traditional lenders.
Inevitably, that has led consumers and businesses to explore other avenues – some good and some not so good.
Today, you can apply for finance from various institutions, including banks, online pawn shops, credit unions, payday loan and cash advance providers and more.
Below, we explore each of these options and look at the pros and cons associated with them.
Online pawn shops
The concept of an online pawn shop may be one that is difficult to get your head around given many people’s ideas of what pawn shops are like.
Instead of loaning against cheap jewellery and various household items, the new, high-end asset lenders that are emerging provide loans against valuable items ranging from fine wine to prestige cars.
They provide short-term loans taken out for between one and six months and once the loan has been repaid, your assets are returned to you.
Interest rates tend to be higher than those associated with bank loans, however, the loans are designed to cover you for a short period of time and only become unsustainable if you fail to use them properly.
Many middle-class individuals who are asset-rich but cash-poor use pawnbroker loans to ease their immediate financial concerns, so if you are of the opinion that pawnbrokers are for the poor and unemployed, you are mistaken.
Payday loans have been heavily criticized in recent years as they have become more popular.
Essentially, you borrow a small amount for anything between a few days and one month and repay the loan once you have the funds to do so.
However, these loans charge an eye-watering amount of interest and many firms have been guilty in the past of imposing hidden charges, therefore making them even more expensive.
The real problems arise when borrowers cannot meet the repayment date and the debt is rolled over, which can see it snowball to such an extent that people cannot afford to repay it at all.
Credit unions are small not-for-profit bodies established and controlled by members with a common link.
That link may be through a trade union, a local community or another connection. There are no shareholders to worry about and any profit taken by the organisation is used to develop it further.
The interest rates charged by credit unions are often lower than those attached to pawnbroker loans and are significantly lower than payday loans. Also, terms can range from five years to 25 years depending on whether the loan is secured or unsecured.
Another benefit is that as a member of the union, you have voting rights and an influence over how it moves forward.
As you can see, banks are not the only places you can go if you need a loan.
Change can be hard for some people to handle and if you are one of them then that is fine. However, the financial landscape is not what it was four years ago.
Doors that were once open may not be any more, but new doors have opened in their place in the form of pawnbroker loans and other alternative forms of credit.