Consumers Shun Unsecured Loans

Wed, 20 May 2009

The value of unsecured loans being taken out has nearly halved during the past year as consumers avoid unsecured borrowing during the recession, new figures have revealed.

Latest statistics from the Finance and Leasing Association (FLA) showed that the number of unsecured loans taken out in February was down 45 per cent on the same period last year.

The FLA said its members wrote just £316 million worth of unsecured loans during the month and attributed the decline to Britons’ reluctance to commit to longer-term repayments .

Geraldine Kilkelly, head of research and chief economist at the FLA, said: "Rising unemployment and low consumer confidence have led to a further drop in unsecured loan new business in the last two months."

"Our figures show that FLA members have written £660 million worth of new unsecured loan business in the first two months of 2009, compared with £1.1 billion in the same period last year."

The FLA research also showed that the value of secured loans for February 2009 suffered a 83 per cent fall on the previous year to £57 million, while credit card lending dropped 11 per to £2.49 billion.

However, the number of consumers using store instalment credit continued to grow, rising by 8 per cent year-on-year to £206 million.
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