Lenders Warning Of CoronaVirus Credit Crunch

Short term lenders have this week warned QuickLoans.co.uk that they intend to withdraw credit facilities from the UK market if CoronaVirus spreads.

The outbreak of Coronavirus is a worrying time for many. Just the fear of the epidemic seems to be having a chilling effect on the economy. Earlier today we saw a proposed credit line of £100 million being withdrawn from the airline Flybe, forcing it into administration.

Flybe could be just the start, businesses that were profitable before may now also find their lines of credit being withdrawn as potential lenders fear collapse. The effects of the economic fallout from the disappearing confidence could be far more devastating than the virus itself.

Lenders have this week warned us that they could withdraw lending facilities at any time. They said that the uncertainty around the virus means that they are unable to assess the ability of individuals to repay the loans.

One well-known lender told us "People who are employed today, could be unemployed tomorrow as businesses go to the wall. People who are getting paid today could be on unpaid sick leave tomorrow. The environment is very unpredictable. Normally we would raise rates to cover the extra risk, but these days we can't do that. Our only option then would be to mothball our lending.".

If lenders do withdraw credit products from the subprime market, the effects could be widespread. Short term loans are often used to pay for emergencies like electricity bills, car repairs. People may have to do without these essentials.

The end result of lenders withdrawing their products could be a rise in the number of loan sharks filling the demand that lenders previously filled. This could be in itself dangerous to both the mental and physical health of individuals.

We would urge the Government to step in and bail out high-risk lenders that fall on hard times due to the virus. This is important because we don't want lenders pursuing debtors who fall on hard times. If the Government supports lenders, lenders will support borrowers.