Personal Loan Suppliers Should Follow ‘Responsibility Rules’
All loan providers should follow the banking sector's code
for responsible lending, an industry expert has suggested.
According to Angela Knight, chief executive of the British
Bankers' Association (BBA), credit suppliers who exist
outside of the industry should be made to follow the
Banking Code. Consequently, Ms Knight purported that
consumers could receive greater protection as lenders will
only issue money to those who meet certain repayment
criteria. She added that otherwise borrowers could soon
become "overstretched" and develop "serious" difficulties
in making payments on personal loans.
In a letter to Mark Hoban, the shadow treasury minister,
the BBA chief executive claimed that: "When a gap opens
between what a borrower wants and what a bank wants to
lend, too often an irresponsible lender steps in. Only
around 63 per cent of unsecured borrowing now comes from
the banks. There are certainly responsible lenders among
the rest, but how is a consumer to know who they are or
what their lending rules are?"
Her comments came as she suggested that non-banking lenders
are making up for an increasing proportion of loan and
credit deals taken up by Britons. She also claimed that a
rising number of suppliers are offering loans to those
borrowers who previously did not meet their bank's criteria.
The association reported that lending, when issued and used
wisely, "has empowered generations" by giving them the
chance to buy goods and services which otherwise could be
beyond their reach. Meanwhile, borrowing was said to be "a
very sensible tool" in spreading out the cost of purchases
over several months, yet Britons were warned to make sure
that they "remain in control" of their spending. However,
those who find themselves unable to pay off money owed to
various creditors were advised to draw up a money
management plan with their provider and seek independent
advice, with a debt consolidation loan a further possible
option.
As a result, BBA advised consumers looking to take out a
loan to "trawl through" credit deals advertised by
suppliers online and in the press to ensure that they find
the most appropriate product for them. Borrowers were also
recommended to consider various features such as the cost
of minimum monthly repayments, additional fees and the
annual percentage rate, in addition to being urged to ask
for a quote.
In recent figures released by the association, a rise was
noted in money issued through secured loans. Over the
course of May some £19.7 billion was lent out to consumers
- an increase of some eight per cent from the same month
last year. The BBA also indicated that the average loan per
house purchase stood at £157,100, 13 per cent higher than
last May. However, lending via credit cards was reported to
have fallen by £0.4 billion over course of the month.
Director of statistics for the BBA David Dooks claimed that
the fall in card expenditure was due to a rising
willingness among Britons to pay for goods upfront rather
than borrow money. Meanwhile, lending through personal
loans and overdrafts decreased by £0.1 billion.
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Abbi Rouse writes for All About Loans. Our visitors can
apply online for bad credit secured loans. We also
specialise in cheap loans, and debt consolidation loans.
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