Why Reintroducing Sub-prime ‘Liar Loans’ is a Bad Idea

admin   09/09/2016   Comments Off on Why Reintroducing Sub-prime ‘Liar Loans’ is a Bad Idea

When Unemployed Loans (selfcert.co.uk) announced it would reintroduce liar loans in the UK market earlier in 2016, the mixed reaction from stakeholders was not unanticipated. However, this is a bad idea that does not simply risk the financial sector, but all other related economics sectors. Here is a closer look at the liar loans and why their introduction by Unemployed Loans is not an idea to flirt with.

Liar-loans/ self-certs are a recipe for a financial crisis 

Though Unemployed Loans correctly points out that about 99% of the UK lenders are unwilling to give loans to unemployed people with bad credit, easy money will not make things any better. When self-certs were introduced because of the impact of the financial crisis, many people rushed to take the easy money without a clear plan for repayment that resulted in very high default rate. Because of this, Lehman Brothers and other financial institutions collapsed.


By floating easy money, Unemployed Loans’ self-certs will float free money and prices of commodities such as mortgage will take a free fall. The free money will make purchasing power suddenly shift, stock market brokers will make millions in a short time, and the entire stock market will be thrown into panic. At any moment, the forces of the market must always be the key drivers to any economic adjustment. However, reintroducing the subprime liar loans will alter the balance and risk the already shaky UK economy.

The model of operation looks to circumvent the law

One question that experts keep asking is how selfcert.co.uk intends to operate in the highly regulated UK market. By operating from outside the UK market, the company only seeks to circumvent the established laws meant to protect the industry. Following the failure of self-certs during the previous introduction, the banking industry has been performing well because of progressive laws. Indeed, the laws allow more people to secure loans through different methods including banks, budgeting loans from local authorities, credit unions, and other legal lenders such as payday establishments.

While the lender promises that all unemployed people can access credit, the risk of losing national privileges could be too much. In the UK, people who take out loans are free to take complaints to the Financial Ombudsman Services for resolution. This helps to protect people from unfair treatment and abuse. This might be one legal loophole that Unemployed Loans’ wants to utilize to charge more on loans.

Easy money is a platform for killing personal efforts

The establishment of credit reports that evaluates five main areas of personal finance including new credit, type of credit, payment history, the amount owed, and length of credit history  is targeted at creating personal responsibility at all levels. By discouraging use of credit score, the lender will be killing personal efforts. Instead, it should consider working with more investors to create more job opportunities, educate young people on financial literacy, and partner with government to grow the economy.


Even through the intention of Unemployed Loans (selfcert.co.uk) may look noble, it could be a roadmap to kill the financial sector and entire UK economy. Instead, unemployed people must be encouraged to look at their strengths while the government works harder with the private sector to provide bad credit loans and create more jobs. It is because of these considerations that Liar-Loans should be discouraged at all costs in the UK.