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Borrowers 'using high-interest lenders'

By Sarah Engle, Thu 30 Jul 2009 - Published in Loans

One impact of the credit crunch has been more people turning to high-interest lenders, it has been suggested.

Ian Boden-Smyth, spokesperson for the UK Insolvency Helpline, pointed out that high street banks have tightened up the lending criteria applied to the public.

"We have even seen high-risk, adverse credit lenders close their books so people have nowhere to turn apart from high-interest lenders," he added.

However, Mr Boden-Smyth explained that credit unions, local advice bureaus and debt organisations could provide borrowers with a list of lenders who are willing to offer loans at normal rates, avoiding the need for alternative sources of finance.

Statistics from Credit Action showed that UK personal debt stood at £1,459 billion at the end of May, representing a £17.9 billion increase on the previous year.

The figures also revealed that total secured lending on dwellings was £1,226 billion in the same month.

In addition, the average household debt in the UK is £58,360 including mortgages and £9,305 if home loans are excluded.