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Borrowers 'can Still Find Cheap Loans'
By Tom
Although secured loans and other forms of credit are becoming increasingly expensive borrowers can still find products with competitive rates of interest, it has been suggested.
According to Samantha Owens, head of personal finance at Moneyfacts, a number of lenders are either withdrawing some of their cheapest loans or are increasing the rates of interest applied to such borrowing. As an example, she noted that Leeds Building Society and GE Money have both exited the sector in recent weeks. In addition Ms Owens pointed out that LoanOne and SPPL have withdrawn all of their products from the secured loan range.
Meanwhile, Money Partners is also on track to do so from November 9th. However, the Moneyfacts analyst asserted that loans offering competitive rates can still be found "especially if you are borrowing larger sums of money". Despite this she advised that as interest rates continue to rise and lenders withdraw from the sector, unless loan applicants act now, they could find that borrowing is in "a very different picture in a few months' time".
Ms Owens added that if the payment protection insurance (PPI) sector, which can help cover consumers' loan repayments should they become ill or lose their job, is revamped consumers could see personal loans and other types of borrowing becoming increasingly expensive.
She said: "Rates have been rising gradually for some months, with competition putting increased pressures on margins and bad debts on the increase. But the credit crunch seems to be the final nail in the coffin, as lenders continue to raise rates but more surprisingly withdraw their products altogether. Anyone looking for a loan would be advised to act sooner rather than later as there seems to be no let up in interest rate rises. If PPI is reformed, which it's very much in need of, the landscape of competitive rates could become a thing of the past."
Meanwhile, Julia Harris, mortgage expert for Moneyfacts, reported that self certification borrowers are set to come under the most financial pressure as a result of loan lenders increasing interest rates and withdrawing products. She pointed out that the credit crunch, which saw numerous providers tighten their lending criteria, at first mainly affected sub-prime borrowers but now self certification clients are "beginning to feel the pinch".
In turn this has led to higher risk borrowers increasingly struggling to not only apply successfully for a loan but also find one which offers a competitive rate of interest. Consequently, Ms Harris suggested that "it pays more than ever" for those looking to apply for a loan to take the time to find the best product which is suited to their individual borrowing
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Earlier this year, moneysupermarket reported that a number of loan lenders have increased the interest charged on their personal loans as the financial sector looks to claw back profits after research from the Bank of England indicated that the mortgage industry is a "shrinking market". Louise Cuming, head of mortgages for the price comparison website, claimed that although the availability of cheap loans will diminish over the short-term, competitive products will re-emerge once more. As a result, those consumers concerned about any financial pressure they may face may wish to apply for a loan as soon as possible.
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