Lenders move away from unsecured borrowing - Loans - News - Moneyfacts


Lenders move away from unsecured borrowing

Lenders move away from unsecured borrowing

Category: Loans

Updated: 09/03/2011
First Published: 15/07/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

There has been a 37 per cent drop in the number of lenders offering unsecured personal loans over the last two years, latest figures from Moneyfacts.co.uk have revealed.

Following the banking crisis, financial institutions have switched their focus to the most risk adverse lending, shying away from offering loans that are not guaranteed against a valuable asset, such as a home.

Barclays has dropped the Barclaycard brand for personal loans, with all unsecured lending now available through its Barclays Bank brand.

Over the past two years a plethora of industry names have left the market. They include: The AA, Intelligent Finance, Direct Line, Lombard Direct, MBNA Europe Bank, Northern Rock and Virgin Money.

Borrowers looking for unsecured borrowing face higher average rates compared with products that were on the market two years ago.

The average rate of a £5,000 unsecured loan has risen from 8.7 per cent to 12.4 per cent – a 3.7 per cent price hike.

In addition, the rate of interest charged on unsecured funds totalling £1,000, £10,000 and £25,000 have all risen by between 1.8 per cent and two per cent.

"Many lenders are pulling away from unsecured lending as the risk of customers defaulting continues to increase," commented Louis Kaszczak of Moneyfacts.co.uk.

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

Secured or homeowner loans are commonly used to fund home improvements or other major purchases such as buying a new car - Compare secured loans

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Get a record low rate loan - if you qualify

Competition in the personal loans market is as hot as ever, so much so that one loan provider has slashed rates to the lowest on record – but only to those who fit the bill. The shopping bill, that is…

Competition returns to loans, but stalls in cards

Our recent figures reveal a mixed picture in terms of unsecured lending, as while competition appears to have returned to the loans market, it’s notably slowed in the credit card sector.

How to improve your credit score

Are you thinking about applying for credit? If so, you need to make sure your credit score is in order.