Unsecured borrowing loses appeal for lenders

Other lenders to withdraw in the last two years include: The AA, Britannia BS, Direct Line, Goldfish, Intelligent Finance, Liverpool Victoria, Lombard Direct, MBNA Europe Bank, MINT, Northern Rock and Virgin Money.

Those lenders that remain in the market have increased the cost to borrowers, with the average rate on a £5000 loan increasing by 3.7%.

Louis Kaszczak, Head of Moneyfacts.co.uk, said: "Many lenders are pulling away from unsecured lending as the risk of customers defaulting continues to increase.

"Latest figures show that unemployment has risen once again. Borrowers struggling with repayments will inevitably forgo repayments on unsecured lending first, while trying to maintain their secured lending commitments such as their mortgage.

"Those lenders that do remain are charging a much higher rate of interest in order to offset the potential risk.

"Borrowers requiring a £25,000 loan over five years will now have to pay an additional £1334 in interest, compared with two years ago.

"Some 78% of the loans available on the market are risk-based pricing. Only two-thirds of customers will get the advertised typical rate.

"While shopping around is key, borrowers need to be wary of making too many applications as this will leave a mark on their credit file and may have a detrimental effect on their changes of being accepted for a loan."

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