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."
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