Brits turn to high-interest unsecured loans
The credit crunch has forced some Brits desperate for money to use high-interest lenders instead of secured personal loans from reputable companies.
Low-income Brits are being hit hard by the credit crunch and are turning to unsecured loans with high interest in order to deal with their debt problems, according to one industry figure.Children's charity Barnardo's recently called on the Office of Fair Trading to launch an investigation into the practices of high-interest unsecured loan providers amid concerns that they may be helping families to spiral into debt.
Ian Boden-Smyth, spokesperson for the UK Insolvency Helpline, which offers advice to those dealing with debt, commented on the Barnardo's campaign saying that low-income families are having to look towards 'adverse credit' lenders in the current economic climate.
High street lenders have stopped providing adverse credit, also known as sub-prime lending, through unsecured loans, meaning that those dealing with debt are having to turn to those charging increased interest, according to the expert.
Mr Boden-Smyth said that due to the credit crunch, high street banks have turned "their back on the public", which is forcing low-income Brits to take out unsecured loans which only add to their debt problems.
He added: "We have even seen high-risk, adverse credit lenders close their books so people have nowhere to turn apart from high-interest lenders.
"Behind the scenes if you do look, if you do go to your local credit union, if you do go to your local advise bureau or organisations like ourselves you will find that there are lots of people who are willing to offer normal rates under the financial inclusion bill."
A recent Moneyfacts report showed how financial institutions are frowning upon personal loans which are unsecured in the current economic climate.
With Barclays pulling their unsecured loan from the market, the bank joins the AA, Direct Line, Goldfish and Virgin Money among others to have stopped offering the risky products.
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