Financial Advice UK - Loans News - £20 billion worth of unsecured loans issued without sufficient proof

Just when many analysts had come to terms with the 3.5% rise in retail sales in May and the fact this did not seem correct, June has seen a fall of 3.9% in sales – the worst fall in 22 years. The...
→ Read More

Disclaimer

Financialadvice.co.uk adheres to the Financial Services and Markets Act 2000. This site contains only factual and readily available public information.

Loans

IVA Debt Advice Helpline

Cheap Loans

Loans News - Last Updated Friday 2nd May 2008

→ Syndicate this

£20 billion worth of unsecured loans issued without sufficient proof

Friday 2nd May 2008

According to a recent report around £20 billion worth of personal loans was given out last year without sufficient checks being carried out with regards to the income of the borrowers. According to the research, which was carried out by uswitch.com, around two thirds of unsecured loans that were granted last year were given out without proper checks being carried out into the income of the borrower, which means that the lenders cannot have been sure about the borrower's ability to repay the money.

Nearly £30 billion was handed out in unsecured loans in this period, but the research results suggest that nearly £21 billion of this was handed out without adequate checks being carried out into the income of the borrower. Officials from uswitch state that this means that details and proof of income were not taken when borrowers were approved for these loans. Personal loans differ from secured loans due to the fact that secured loans are secured on a persons property.

One official from uswitch stated: “With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders would have learnt their lesson, but the potential profits have clearly been too good to resist. While the credit crunch has forced lenders to tighten up their lending criteria, these latest amendments to the Banking Code do not go far enough to help promote responsible lending in all cases.”

He added: “Further credit checks could be costly and no doubt the bill would be passed back to consumers. However, it could be a small price to pay if it helps to curb the rapid growth of debt which is spiralling out of control. We cannot ignore the fact that consumers have a responsibility to borrow sensibly, but lenders really aren’t helping. As consumer debts increase by £1 million every five minutes, there is clearly a need for watertight measures to be put in place to ensure that the banks are lending responsibly.”