According to research by Moneyfacts, the unsecured personal loan market is shrinking, with the number of loan providers decreasing by 10% in November.
The reason for this decrease is three-fold:
1. The global credit crunch – lenders are finding it harder to secure funds, so are re-pricing to lower their exposure to risk.
2. An increasing number of loan defaults – According to research by Credit Action, 7,716 loan repayments are going unpaid every day.
3. Higher interest rates, despite the Monetary Policy Committee’s action in December to reduce rates to 5.5%
This comes at a time where many people are struggling to manage their debts, with the Citizens Advice Bureau reporting a 20% increase in debt enquiries in the last year. Making debt the number one enquiry received, accounting for 6,600 new enquiries per day.
The above factors have also affected the secured loans market, with a number of lenders withdrawing from the market, re-pricing products and reducing LTVs. However, Tom Nelson, Head of Secured Lending at Zen Finance believes there are still some good secured loan deals available. He recommends using a broker like Zen Finance to access the market. "Zen Finance has access to a panel of lenders and can quickly access the latest products to determine the best loan for the customer."