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The Industry voice: A Director's lowdown on the secured loans market
It is time that we opened our eyes to the fact that ‘credit-worthy’ clients may not have a perfect credit history...
Gary Bailey, director at Blemain Group, gives us his loan talk:
“There is no question that the secured loans industry has changed beyond recognition since the onset of the credit crunch. The recession meant that only the fittest survived – and now, lenders must now look to adapt and innovate, bearing in mind the market demands, in order to survive and grow.
Many of the bigger names left the market in 2008 and 2009 after finding themselves unable to offer secured loans as their funding evaporated. Now, however, rumours abound that a number of well-known names will return to the market in 2011, and we have already seen a handful of newcomers or re-entrants to the industry; those with the greatest potential seem to be the players with strong funding structures or with the aim of addressing certain niche sections of the market. The greatest challenge facing brokers will be that the potential myriad of ‘new’ lenders will opt to address the new layer of customers that would previously have been seen as prime.
Of course, brokers and the market should welcome the increasing number of lenders, which present them with a range of competitive new products to offer to their customers. However, the volume of customers in this space represents a relatively small segment of most brokers’ portfolios, which means they could find themselves placing the same amount of business across a broader spread of lenders.
For lenders, too, this scenario is not entirely positive; if they cannot differentiate and offer something new and competitive, their ambitions will stall. Rather, it will be those lenders that recognise opportunities and innovate to meet the changing demand who will help to grow the market and provide a sustainable portfolio of products for brokers.
The industry must cater for the needs of the remaining traditional customers and recognise that ‘creditworthy’ doesn’t necessarily mean that a client must have a perfect credit history. In times of recession, everyone has the potential to suffer a credit record discrepancy. To see market-wide recovery in the secured loans sector, lenders need to be prepared to recognise other ‘creditworthy’ customers with sustainable affordability, to ensure that potential clients are not left by the wayside.
Ultimately, by servicing the demands of these customers prudently, the market will once again broaden, and niche elements will help to create growth for those who are prepared to stand out from the crowd with appropriate products. It is undoubtedly an exciting time to be working in the secured loans business, and the future looks bright.”