Consumer credit choices shrink

02/10/2009

The latest figures from the Finance and Leasing Association show that the consumer credit sector has stabilised in recent months but there are fewer options for people looking to borrow money.

In July, the FLA's members reported that new business fell by 17 per cent compared to the same month last year, suggesting the sector's health is improving.

While things look on the up, annual comparisons are still £11 billion down on last year, with the secured loan sector being one of the worst to suffer.

In the last three months, lending in the market fell by 83 per cent and things could get significantly worse if regulations are brought into the market.

The FLA's Russell Hamblin Boone told Moneyfacts.co.uk that over-regulation will make it harder for consumers to access credit, which could drive them into the arms of loan sharks and unscrupulous lenders.

According to debt solutions firm EuroDebt, there is no doubt that mainstream lender ability and appetite to grant credit needs to be re-assessed as we come out of recession.

Credit worthy consumers having to use very expensive forms of credit only benefits the non-standard lenders charging high rates of interest. These companies tend to have less sympathetic debt recovery approaches.

People in financial difficulty are struggling to release equity in their property to consolidate debts and many have turned to non-borrowing solutions like Debt Management Plan'>Debt Management Plans or an IVA.

With house prices having only just recovered to the same position as one year ago, it is likely to be some time before many homeowners have any realistic chance of finding an attractive secured loan product at the right loan-to-value.

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