Rise in debt causes concerns for lenders

12/02/2007

Many credit card companies, financial institutions such as banks and other lenders are taking more caution when it comes to providing unsecured loans and credit cards. The primary reason behind this seems to be a result of the increase in levels of bad debt within the UK.

Statistics have shown that there has been a huge shift towards people becoming insolvent, and in fact the figures reached an astonishing 100,000 during last year. Therefore the knock on effect of this and the establishment that takes the brunt of it are the financial companies and providers of such loans.

Credit Card providers and similar providers of loans are now urged to make more in depth checks before allowing people to take out loans. Checks such as proof of income and expenditure are now more essential before any applications are granted for loans.

The long term impact of this is quite positive as those with poorer credit rating wont fall into a trap of increased debt that they cannot manage.

According to Chris Tapp, the associate director of Credit Action, stated: "Banks suffer from increasing numbers of people being declared insolvent, and their bad credit figures are very high – I think it was about £1.4 billion that was written off in 2006 because people couldn’t repay. If it’s going to hit banks in the pocket then they’re going to try and do something about it."