Lending Money through the Ages – How have Things Changed?

According to figures released in September 2017, consumer credit has increased by 19% during the last five years.

When you consider this and the diverse range of credit available in the digital age, you begin to understand the evolution of lending throughout the ages and why we’ve become so reliant on borrowing over time.

In this article, we’ll chart the fascinating history of lending from the days of Ancient Greece to an age of quick loans and credit cards. If you have a surplus of money, jump straight to the section below on peer-to-peer lending or see what you can find out here if you want to know more about investment of your surplus cash.

The Concept of Lending – Where did it all Begin?

In many ways, the history of lending can be traced back to ancient Greece, when citizens would borrow money by offering their possessions as collateral. This heralded the birth of the pawnbroking industry, which remains highly lucrative and relevant today.

The Middle Ages saw further evolution in this space, as traders and merchants in Venice began to borrow money from Jewish lenders in order to fund their activities.

It was interesting to note that Christians were forbidden from lending money with interest at this time, while Jewish citizens could only extend money to those of a similar faith.

The financial market became more structured over time, and in the late 18th century the world’s first building societies were established in the heart of the UK. This ushered in the next generation of lending across the globe, with The Philadelphia Savings Fund Society subsequently set-up in the U.S. to allow citizens access to loans and bank accounts.

Soon after banks and building societies began to spring up across the western world, the idea of secured lending started to take hold. In 1932, U.S. Congress created mortgage finance in the form of the Federal Home Loan Bank system, in order to help borrowers afford their own property.

Heralding the Age of Fintech

From this point, the evolution of the lending market began to grow at an incredible rate. In fact, it was in 1985 that companies first began to leverage the Internet to manage the loan application and review process online.

This expedited the process considerably while ensuring that applicants were informed of the lenders’ decision in a quick and efficient manner.

Less than 20 years later, we also saw the first peer-to-peer lending platforms established in the U.S. and the UK. This built successfully on previous innovations to create an application and review process that was exclusively accessible online, while also enabling individuals to borrow from their peers rather than institutional lenders.

This was arguably one of the most empowering developments in the history of the lending market, while it also offered applicants access to increasingly competitive interest rates.

The Last Word

Thanks to these developments, the personal lending market has grown exponentially during the digital age. This has created even quicker approval times for applicants, while also offering them access to an increasingly diverse and competitive range of products.

This is largely good news for households, although it does raise a question with regards to the accessibility of loan products in 2018. Given the rate at which consumer credit is rising in the UK, it may be argued that the growth of the loan market has made it too easy for people to borrow.

Fortunately, this market is well-regulated by the Financial Conduct Authority (FCA) and similar bodies, while customers also have the chance to compare their options online and identify the most reputable lenders before making a decision.

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