Money News

Cheap loans are history

It’s harder than ever to get a personal loan as lenders move to being on a virtual ‘lock-down’.

Loan providers are tightening their lending criteria, hiking their interest rates and in many cases, only lending to existing customers.

The cost of loans has risen in 2009, with the average rate of the top 10 loans of £5,000 increasing from 9.24% in January to 10.78% today, according to moneysupermarket.com.

Furthermore, eight out of the nine “big” lenders are now only offering loans to existing customers – typically those who hold a current account.

Tim Moss, head of loans and debt at moneysupermarket.com, said: “We have seen the banks go from choosy to almost locking down completely.”

While moneysupermarket.com says there is a 20% rise in the number of customers looking for a loan, official figures from the British Bankers’ Association show that monthly lending through personal loans has fallen 28% since the end of last year.

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “Banks have started to regain confidence in lending, and we have recently seen activity picking up in the mortgage market, but their appetite to lend via personal loans remains subdued.”

He advised: “If you need a cheap loan, it’s essential that you shop around and compare loans to get the best deal.

“It’s definitely worth checking what your current bank can offer you, as well as checking out deals from ‘non-bank’ lenders like Tesco and Sainsbury’s.”