Personal loan market continues to struggle

It has been revealed that an increasing number of payment defaults in the personal loan market are pushing personal loan rates higher and higher. The best three-year rate available at the moment on a £5,000 loan is around 9% which is almost double the rate seen prior to the credit crunch in 2007. So how will this particular market pan out in the short to medium term?

In what is becoming a self-fulfilling prophecy, as banks and loan companies increase their personal loan rates this will push more and more people into default and push rates higher and higher. Not only are we seeing rates pushed higher but also seen approval rates reduced with banks and loan companies requiring more and more of a gap between the affordability factor and loan repayments.

When you couple the increase in personal loan interest rates with ever increasing credit card rates there is no doubt that the next few months will be difficult for many people in the UK. We are starting to see a repeat of the situation we saw in the credit card market some months earlier where ever increasing payment defaults pushed rates higher and higher and pushed more people towards financial oblivion.