May 5, 2009
Consumers Say No To Unsecured Loans
The latest statistics released by the Finance and Leasing Association has showed that unsecured loan business has been significantly hit by the credit crunch.
New business for unsecured lenders dropped by 45% February compared with February 2008, meaning more people are realising the perils of unsecured, expensive borrowing.
Unfortunately, store instalment credit continued to defy the downturn with 8% growth in February. These cards may seem like a good choice at the counter, but not only are the rates highly uncompetitive, also the cards almost become a ticket to shop. In the downturn people have to cut down on risky debt and that means saying no to attractive store cards and unsecured loans.
Total finance provided to consumers in the 12 months to February 2009 by FLA members was £58.2bn, down by 12% on the 12 months to February 2008, also new credit card business was down 11% in February compared with February 2008.
Although risky debt is on the wan, so is secure debt. The FLA says secured loans fell 83% in February 2009 compared with the same month in 2008. This is bad news – secured lending is a much better option than higher rate unsecured lending. Unfortunately, the credit crunch has meant that funding has all but dried up for secured lending.
Geraldine Kilkelly, head of Research and chief economist at the FLA, says “Rising unemployment and low consumer confidence have led to a further drop in unsecured loan new business in the last two months. Our figures show that FLA members have written £660m-worth of new unsecured loan business in the first two months of 2009, compared with £1.1 billion in the same period last year.”
SOURCE: FLA, 30/04/09
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