subject: New Lenders Being Set Up [print this page] After a barren few years for the UK secured loans industry it finally seems that things may soon get better. Not only has one of the existing lenders reduced its rates in an effort to attract more business but it is rumoured that two more lenders are going through the set up process and aim to come into the market early next year.
The news is a breath of fresh air to anybody still working in the industry and to prospective borrowers alike, as an introduction of extra competition can only be an improvement to the industry. There has been too few lenders for far too long now, which has allowed the remaining lenders to charge what they like and be pickier with regard to who they are prepared to lend money to. The lack of competition has also seen a scary increase in the number of alternative type lenders who are free to charge ridiculous interest rates to people who can ill afford to pay them, such as;
V5 Loans
V5 Loans are loans that are secured on your car logbook and can be taken out by anybody aged 18 or over that owns their car outright, no matter what their credit history; they are available for amounts from 100 to 25,000. Even though the lenders have the security of holding the V5 document (logbook) and MOT certificate which means that they can sell the car to recover their money should the repayments not be met, they charge ridiculously high interest rates up to 437.4% APR. However because they will lend to bankrupts and do not carry out any credit checks the uptake on this type of loan has increased hugely over the last two or three years.
Guarantor Loans
A guarantor loan is a loan that is guaranteed by a guarantor, which essentially means that if the borrower fails to keep up with the repayments then the lender can go to the guarantor to seek repayment. This again is a relativley risk free loan for the lender, because although no credit check is carried out on the applicant, and the applicants credit history or residential status is not taken into consideration when assessing the application. The guarantor will be searched and needs to be a UK homeowner with sufficient income to make the repayments should the applicant fail to do so. However this again does not stop the lenders from charging quite huge APR's they invariably range from 42.6% APR to 62.4% APR variable. With this type of loan the borrower can borrow any amount from 500 to 5,000, and the loan can be repaid for terms from 12 to 60 months.
Pay Day Loans
Payday Loans are probably the most popular of the newer unconventional loan types, and probably the one that receives the most bad press. A pay daay loan is simply a short term loan that is taken out until your next payday, it is available for amounts from 80 to 1000 depending on the lender. Also the typical APR charged varies between 66.39% Apr for smaller amounts up to 2689% APR for higher amounts. This typically equates to a charge of between 20 to 272 for every 100 borrowed.
In Summary
The introduction of more conventional lenders offering cheaper loans than those that are currently available can only be a step in the right direction. The UK consumers' appetite for loans has not diminished as a result of the credit crunch which means that the lenders have had it all their own way for far too long.
