Unsecured loans are immensely popular in the UK consumer market. However, for the last three months, the unsecured loans market is witnessing a worrying trend. The lenders are cutting back their loan products and withdrawing from the market.
Worldwide, the financial markets are badly affected by the credit crunch that has its origin in the U.S. sub-prime market collapse. A surge in the number of defaults in U.S. sub-prime mortgage market gave rise to a lot of bad debts. These debts were transferred and sold to the banks, adversely affecting the worldwide economy.
In the UK, the banks are not sure how much of their debts are bad. The banks are still trying to find out the exact quantum of losses that they have suffered. This has led to a precarious situation. Lenders are not willing to offer personal unsecured loans due to apprehensions that they might need money in future to set off their losses. Inter-bank borrowing has also been badly affected.
Of late, the market unsecured loans has shrunk as many lenders have withdrawn their offers. Lenders like GE Money and Leeds Building Society have stopped offering unsecured personal loans. Eskimo Loans that is funded by ailing mortgage lender Northern Rock has also withdrawn its range of personal unsecured loans.
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