Cheap loans a thing of the past

A recent article posted by the Times shows that cheap loans are starting to be something closer to extintion. It apears that lenders are fighting against each other to see who can provide you with the worst loan. Despite goverment’s cuts to the base rate, interest rates are continuing to soar. Here is an extract:

Several providers have increased personal loan rates in the past four weeks – including Barclaycard by 2 per cent, Sainsbury’s Finance by 1 per cent, and Britannia building society and Lombard Direct by 0.5 per cent.

Louise Bond of uSwitch.com said: “Recent activity in the loans market seems to indicate that providers are actually battling to get themselves out of the best buy tables. The cuts by the Bank of England are simply not being felt by people looking to take out a personal loan.” :

At the same time that the interest rates are going up, the choice of lenders willing to offer you a cheap loan is dwindling, as the article continues:

Whilst six months ago borrowers could get rates of 7 per cent or less, all of these deals have now disappeared. Moneyback Bank, which consistently offered loans as low as 5.5 per cent over the past two years, has closed for new business completely.

Last year almost 1.3 million people took out an unsecured personal loan to consolidate debts – but with interest rates rising and credit being harder to obtain, less borrowers will have that option.

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Christmas as usual, or not?

Credit Action’s monthly debt statistics came out today including a Christmas season special report. Despite shrinking economy, falling stock markets and gloomy times ahead, 57% of UK consumers will spend the same this Christmas as they did last year, for many people in the UK, this year will be Christmas as usual.

This may come as good news to the retail industry as the reduction in VAT that comes into force today. A lot has been said in the past week since Chancellor Alistair Darling announced the cut in his pre-Budget report in a bid to encourage consumers to spend more and boost the economy. A 2.5% reduction in VAT in many cases is dwindled by the massive reductions on most high street stores this week, some of them cutting prices up to 50% to lure shoppers into their stores and try to salvage the pre-Christmas season.

But reduction on VAT or massive shopping discounting is not going to help cash-strapped families who turn to credit to pay for Christmas, these families could be setting themselves for a New Year debt disaster, children’s charity Action for Children is warning. Read the full research findings here.