Lenders being more cautious due to bad debt levels
According to a recent report from a UK credit and financial group, many banks, credit card companies, and lenders are now exercising far more caution when it comes to lending money in the form of unsecured loans and credit cards, and this is due to the rising levels of bad debt in the UK.
Last year the number of insolvencies in the UK stemming from people being unable to keep up with their debt repayments broke the hundred thousand barrier for the first time, leaving banks and financial companies reeling from loss of revenue.
In the past lenders have been criticized for failing to carry out adequate checks before allowing consumers to take out loans. For example, a recent report highlighted that the majority of credit card issuers don’t ask for any proof of income and outgoings from applicants before granting them a credit card, and in many cases this proves to be a big mistake as the card holder may find that they are unable to keep up with repayments on the card and may find their balance getting higher and higher.
However, according to Credit Action, many lenders are now really tightening their belts when it comes to giving out loans and credit cards, and are coming down harder on those with bad credit as well as carrying out more thorough checks on those with average or good credit. This means that bad credit consumers will have to rely more than ever on secured finance in order to take out a loan, but could help them to avoid getting themselves into an even worse financial situation.
Chris Tapp, the associate director of Credit Action, stated: "Banks suffer from increasing numbers of people being declared insolvent, and their bad credit figures are very high – I think it was about £1.4 billion that was written off in 2006 because people couldn’t repay. If it’s going to hit banks in the pocket then they’re going to try and do something about it."
Richard Smith
12th February 2007
More Information:
- What is Different about Bad Credit Loans?
These days, banks offer a range of products and services designed to meet the needs and wants of all their customers. Many branches will have a different advisors and customer relations managers who are assigned to the different customers of the bank.
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We all like to think of ourselves as fairly responsible and trustworthy people, especially when it comes to financial commitments. But the fact of the matter is that some people are more reliable and responsible than others and banks and other lenders know this.
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Is it possible to obtain a loan if you have a poor credit score or even if you've declared bankruptcy? The answer is yes. However, not surprisingly, the loans available will have higher interest rates and restrictions that are more stringent.
