According to research by Moneyfacts.co.uk, some 37 per cent of lenders have pulled out of the personal loan
market in the past two years, leaving the remaining lenders charging much higher interest rates.
Intelligent Finance, the AA, Northern Rock, Virgin Money
, Lombard Direct and Direct Line are among the UK lenders that are no longer offering personal loans
as a result of the credit crunch.
Moneyfacts.co.uk says that a £25,000 loan costs an extra £1,334 in interest than it did two years ago. Average interest rates for a £5,000 loan are 12.4%, which is up from 8.7% in July 2007.
In addition, some borrowers have been hit with being forced to sell their houses by lenders who have obtained charging orders from courts, warns the Citizens Advice Bureau.
Louis Kaszczak of Moneyfacts.co.uk says that making too many personal loan
applications can be bad for a person’s credit score. He says, “while shopping around is key, borrowers need to be wary of making too may applications as this will leave a mark on their credit file and may have a detrimental effect on their chances of being accepted for a loan.”