High Street Banks Restrict Personal Loan Availability
An investigation by financial products comparison site The Lending Wizard found that the high street banks will only make unsecured personal loans available to their current account-holders.
The undercover investigation looked at the websites of 26 mainstream banks and discovered that only Alliance & Leicester, the Co-op/AA, Sainsbury’s and Tesco were prepared to lend personal loans to new customers. It said that the rest of the banks were only offering unsecured personal loans to a few selected existing customers – and even then at frequently high premiums.
One example given was the Barclays site, which declared that “you could be eligible for a Barclayloan Plus if you’ve held a Barclays current account for more than 12 months, paid at least £1,000 into your account each month, managed your account well and have a good credit history”.
First Direct was even more forthright about whom it was prepared to lend to – insisting that any personal loan repayments should take place by standing order “from your First Direct account”. The investigation also found that the majority of high street banks personalise their loan rates, offering a third of their customers personal loans at a far higher rate of interest than the headline rate on their adverts.
The base rate of interest set by the Bank of England is at an historic low of 0.5 per cent, but despite this, personal loan rates are around 12.6 per cent to borrow a £5,000 sum. The Lending Wizard spokesman Olivier Beau de Loménie noted that “new borrowers are restricted in where they can go for credit, because most banks want to know their financial habits first”. “People should scour the market thoroughly,” he insisted.
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