27 Dec 2024

Lenders shy away from unsecured borrowing

Latest figures from Moneyfacts.co.uk show a 37% drop over the last two years in the number of lenders offering unsecured personal loans.

Barclaycard is the latest lender to pull out of the market, but loans are still available through Barclays Bank.

Other lenders to withdraw in the last two years include: The AA, Britannia BS, Direct Line, Goldfish, Intelligent Finance, Liverpool Victoria, Lombard Direct, MBNA Europe Bank, MINT, Northern Rock and Virgin Money.

Those lenders that remain in the market have increased the cost to borrowers, with the average rate on a £5,000 loan increasing by 3.7%.

Loan amount	Average Rate July 2007	Average Rate July 2009	Increase
£1,000	17.3%	19.2%	1.9%
£5,000	8.7%	12.4%	3.7%
£10,000	7.4%	9.2%	1.8%
£25,000	7.3%	9.3%	2.0%
Source: Moneyfacts.co.uk 15.7.09

Louis Kaszczak, Head of Moneyfacts.co.uk, commented:

“Many lenders are pulling away from unsecured lending as the risk of customers defaulting continues to increase.

“Latest figures show that unemployment has risen once again. Borrowers struggling with repayments will inevitably forgo repayments on unsecured lending first, while trying to maintain their secured lending commitments such as their mortgage.

“Those lenders that do remain are charging a much higher rate of interest in order to offset the potential risk.

“Borrowers requiring a £25,000 loan over five years will now have to pay an additional £1,334 in interest, compared with two years ago.

“78% of the loans available on the market are risk based pricing. Only two thirds of customers will get the advertised typical rate.

“While shopping around is key, borrowers need to be wary of making too many applications as this will leave a mark on their credit file and may have a detrimental effect on their changes of being accepted for a loan.“

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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