The number of people being turned down for a personal loan has soared by a third in the last 6 months as the much maligned credit crunch continues to spread concern.
Figures from MoneyExpert.com show that nearly 1.91 million adults applying for a loan in the past six months have been rejected, a dramatic rise on the 1.39 million that were rejected in the six months previously.
That’s around 10,000 loan applications turned down every day!
The increase in rejections is that latest in a series of measures taken by lenders in light of the continuing crisis in the financial markets.
Banks fund many personal loans in the wholesale money markets and with the cost of borrowing there rising, the banks have been forced to tighten their belts, imposing much stricter lending criteria.
Not only are more people being rejected, but those who have loans already are facing heavier repayments. Last week Abbey raised the rates on its first-time buyer tracker mortgages by a substantial 0.45 percentage points to 6.99 percent, despite the Bank of England announcing that rates would stay the same. 9 other lenders increased the cost of taking out a personal loan by as much as 4 percentage points.
However, if you do need to borrow money, there are ways of getting around the crunch.
Know your limits
Lenders always check to see if you’ve been turned down for a loan previously so to avoid a bad history it’s important to know what sort of credit rating you have and not then apply for a loan that’s clearly out of reach.
Many credit agencies offer a 30 day free trial to check your credit rating. Click here to check your credit rating now with Credit Expert from Experian.
Personal loans certainly make up the biggest portion of debt in the UK. There are an estimated 12 million adults with £66 billion worth of personal loans outstanding in the UK – that’s twice the amount of debt on credit cards, and 6 times that on overdrafts.
With 2 out of every 3 personal loans thought to be taken out to consolidate other debts, they can be seen as more manageable, but with decent organisation there’s no reason why credit cards and overdrafts can’t be made to work. Almost all credit cards offer direct debit repayments and overdrafts simply require you to consistently check your balance to avoid being stung.
Finally, don’t forget that’s it not only your own bank manager that can give you a loan. Many people think that they can only take a personal loan from the bank holding their savings or current account, but that’s not the case, and others, perhaps offering more flexible lending criteria, may be willing to help.
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