/24-7PressRelease/ - LONDON, UK, April 11, 2008 - The deepening credit crunch is driving up the cost of taking out a loan from the UK loan market. There is little improvement in the scenario despite the cuts in the Bank of England base rate. The UK loan market lenders are still failing to carry out proper checks to make sure that the loan applicant can pay the loan on proper time.
The average rate on a three-year 5,000 unsecured personal loan has risen from 8.2% to 9.9% in 2007. This hike has added about 300 to the cost. However, the hike has not deterred borrowers. The Bank of England figures for February show that new consumer credit rose by 2.4bn in last two months. In January 2008, that figure rose by 900m. Many of these loans are being taken out without lenders seeking proper proof of borrowers' income.
According to the survey by price comparison service uSwitch.com, only 30% of borrowers in the past 12 months were asked to prove how much they earn. 45% of the borrowers who took an unsecured loan during this period did so with a company other than their own bank. This leaves the lender with comparatively little information about the person's ability to repay the loan.
A large number of leading economists in the UK are critical of this 'loose' lending. It is shocking but true that even in these troubled times two out of three borrowers don't need to prove their salary.
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