UK Personal Loan
An assessment of the UK personal loan market.
The internet isn't the only thing to cause a stir in the UK personal loan market. Thanks to credit scoring and a benevolent economic environment, you now have somewhere around twenty times more places to look for a loan. As well as your bank, watch for the plethora of direct lenders- provided you have a good credit rating.
As with investing in the stockmarket, the arrival of the internet has given the UK personal loan market something of a shakeup. By cutting the costs of lenders, rates to you the customer can be cut too.
But that's not the only big change- in fact there are very few internet-only loan arrangers. No; the biggest change of all is the competitiveness of the loan market; brought on largely by the fifteen years of stable, low interest rates we've all enjoyed. Twenty years ago, with interest rates bouncing up and down (remember paying 19% on your mortgage?) only banks would lend you money, and even then only after a stern interview. Now that base rates are stable between 3% and 7%, lots more companies can afford to lend you money- it's a lower risk to them- and they can do it directly without the need for an in-depth discussion with you. Hence the UK personal loan market now includes supermarkets (Tesco), direct lenders (Lombard Direct), and just about anyone who knows you want to buy something (the AA).
Behind the scenes in all this are two big companies- Experian and Equifax, who provide direct credit checking facilities. You can bet when you apply for a UK personal loan, your risk to the lender is assessed by one of these two companies. If you're turned down for credit, it's because one of these companies thinks you're a bad debtor. If you're not, you need to find out why they think you are, and for a fee of £2 you can write to them and get your entire credit history (and if they've made a mistake, you can find out how to rectify it).
If you still have bad credit, there are specialist lenders (Purplequote) who can help you. But even though the credit assessment companies seem like "big brother" watching your every transaction, it's their fast automated service to the lenders which underpins the breadth of products available today. Without them, you'd still have a small selection of banks to go to, and you'd pay for the privilege of the interview-based assessment. Indeed even today, banks are up to 6% APR more expensive than direct lenders for that very reason.