Thanks to the continuing tough economic climate, the focus in all lending activity is risk and as a result unsecured personal loans have seen some of the sharpest increases of recent times.

In fact, personal loan rates stand at a nine year high, according to Moneyfacts. Lenders are unhappy to offer money to people with no security. On the other hand, lenders are still offering money to people who are able to afford to secure debt against their home, safely.

Michelle Slade, analyst for Moneyfacts says: “Unlike on a mortgage, there is no security that a personal loan debt will be repaid. In such a risk adverse market, lenders are only offering loans to the most creditworthy applicants and then at a premium."

The website says there is now a £1,055 difference between the cheapest and most expensive £5,000 personal loan – for those people who are unable to secure the cheapest deal, that's expensive money indeed.

Andrew Hagger of Moneynet.co.uk says: "With banks and building societies still adopting a far more cautious stance even when it comes to mortgage lending, even with your property as collateral, it’s no surprise that the appetite for unsecured lending has pretty much dried up."

If you want affordable loans, you need security in 2010, and that is only possible with a secured loan or a mortgage. Talk to a secured finance specialist about your ability to use your home as a means of getting hold of cheaper credit.

SOURCE: Moneyfacts, Moneynet, 01/02/10

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