Borrowers still struggling to find credit
Only 5 of 26 high street lenders are offering loans to new customers. Our research reveals that borrowers are still struggling to find loan deals, with the number of products available to new customers falling significantly since October 2008. We looked at those loans available to new customers compared to those available to customers with an existing relationship with lenders - and found that a mere 5 out of 23 current high street lenders (19%) has any kind of loan available to new borrowers, namely A&L, Sainsbury’s, Tesco, Co-Op / AA and Zopa. This represents a significant drop when compared to 23 lenders (88%) in October 2008. Over the same period, the number of relationship-only lenders or those banks only willing to lend to existing customers, has increased from 2 to 12.
It remains a tough climate for those looking for credit at the moment. In order to limit risk many lenders have tended to restrict their new lending to existing customers, as they have the comfort of an intimate knowledge of how these people conduct their financial affairs (as well as access to their current accounts). As a result, new borrowers are severely restricted in where they can go for credit. It is crucial that these individuals are fully aware of the options available to them and research the market thoroughly to ensure they get a loan that is right for them. This is where thelendingwizard.com is extremely valuable as we can give accurate quotes for a wide panel of lenders quickly without negatively impacting a customer’s credit rating.
Should the OFT control short-term credit?
The OFT has concluded last week that new legislation to control the price of short-term credit would not benefit consumers (see bbc article).
There is no doubt that low income borrowers should be offered protection against unfair charges. However, in certain circumstances APR is not a good way to measure the cost of borrowing. For example, borrowing a pay-day loan of £300 for 10 days could cost around £35 which represents a 2690% APR but it is still less than a £50 fee for an overdraft or the overall cost of a late payment charge. In recent times, people have been falling behind with their credit repayments and higher rate credit repair loans is sometimes a way to get your credit profile back in order. It can also be an option to ensure your balance is reducing (vs. making minimum repayment which will only marginally reduce your level of debt).
What is most important is that people should find out as much as they could about the final cost of borrowing before applying for a loan. Typical APRs are often misleading as only 66% of accepted applicants will get it but on average less than 20% of applicants get accepted and the actual rate offered could be significantly higher than the rate advertised. Thelendingwizard.com is a good place to start as we are the only comparison site that offers true quotes rather than simply displaying typical rates. Being able to review your options with honest, transparent information is the key to making sound decisions and to borrowing wisely.”
Is it worth building a credit history?
If you are fortunate enough to never have had to borrow money and never had credit cards, student loans, etc, this could be problem if a time comes when you need to borrow money (e.g. get a mortgage). Why? because you don't have any credit history.
Why is this the case? Surely the policy should be if you have zero credit history, you are automatically given a positive rating?
How you conduct any historical credit shows a great insight into how you will conduct your accounts going forward, a mortgage is such a large amount of money a lender will need something to base the decision to lend to you on in order to mitigate their risk.
Perhaps take out a credit card just for your food or petrol and repay it by direct debit in full each month to demonstrate you ability to manage your credit commitments responsibly.