Funding for Personal Loans Drying Up

Posted 2007-11-30

Britons may find it impossible to secure a mortgage or personal loan after the holidays, reports Moneyfacts.co.uk. 

As the effects of the credit crisis become more widespread, loans are becoming harder to get. 

Ten percent of lenders have left the market.  This week, Hanley Economic Building Society and Eskimo Loans joined GE Money and Leeds BS and LV in withdrawing from the unsecured loan market. 

The number of firms leaving the market in the past month is a worry for Esther James, personal finance manager at Moneyfacts.co.uk. 

James does not see evidence that the increase in interest rates is slowing and she fears that credit issues will have a negative impact on the personal loan market. 

She encourages anyone seeking a personal loan to “act sooner rather than later.” 

She points to several factors which could lead to a very different and unsettled lending environment in 2008, including fewer choices for borrowers, a more conservative lending strategy on the part of lending institutions, and the pending decision regarding payment protection insurance. 

It is becoming more difficult for Brits to secure a loan and lenders are extending the wait period, so those who want to borrow should begin the process as soon as possible. 

According to Katie Tucker, technical manager at mortgage broker John Charcol, the credit crunch favors lenders.  Even those with money to lend are pulling back in an effort to keep business at a manageable level and provide excellent service to their current customers. 

The current wait for an update call at the Woolwich, for example, is one hour. The wait to have an application reviewed is one week. The message here is to act early. 

Ms. Tucker urges borrowers to allow extra time for the application process. Customers planning to refinance their mortgages after Christmas may find themselves paying an additional month on a high rate if they revert to their lender’s SVR while they are waiting.

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