Time is now getting harder for millions of Britons as the availability of cheap credit is now squeezed. Personal loans, formerly cheap and easy to obtain, have started to dry up due to the credit crunch and have become more expensive also. Plastic applications are being rejected. Credit in the UK is now become some how tougher to avail.
In these circumstance, the potential attractions of a loan secured against the property you own is comparatively brighter. Such loans appear to offer significantly better rates of interest than the alternative forms of credit, and lower monthly outgoing if the loan is linked to a standard mortgage repayment period. But, these loans come with the clause of repossession. Your property is at risk if you are unable to repay the loan amount on time.
Low cost unsecured loans are now the matter of past as the debt crisis is getting worse. Debt experts have seen a 20% increase in the number of people who have been calling for help. The debts they need help with include the repayment of the outstanding and also fresh loans secured against their properties.
Until one year ago, with many lenders willing to offer loans without any security with rates as low as 6.5%, low cost unsecured loans were seen as the cost effective financial products. But there is a complete change in the scenario with in a year.
In the absence of low cost unsecured loans, the secured or second charge loan market is already become massive. This market worths between £5bn and £6bn a year, with more than £35bn outstanding in loans. In the current credit crunch, where people are unable to access credit cheaply, some predictions see it rising to £10bn by 2010. Many of those who take out loans against home security are borrowers who are already facing bad credit problems. Research from a well known price comparison website has found that nearly 13 million people have taken out loans to consolidate their existing debts, of whom more than 8 million go on to build up further debts.
The worst affected people in the squeezed credit situation are the unemployed. As the unsecured personal loans for unemployed is now tough to avail, the sudden job loss has become disastrous for many. People having home are in a better position in this situation as they can avail loans by pledging their home as security.
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