How the recent "Credit Crunch" could affect you

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Author: Liam G

Article source: http://www.articledeshboard.com/. Used with author's permission.

Over the decades the world's economy has had its fair share of financial crises. The past few months have seen these come to a head.

The problems began when mortgage lenders in the US lent billions of dollars in the form of mortgages to less than creditworthy applicants. These debts where then packaged up and sold to various financial institutions around the world.

These "bad debts" are now concealed somewhere in the world's financial system. Until these debts are dealt with, banks will be reluctant to lend to one other.

How does this affect me?

With banks and financial intuitions unsure on the risks involved with lending to one another, a ripple effect is being sent out into the rest of the lending world.

If you have applied for a loan recently and were denied, then chances are it's down to the "credit crunch".

Rest assured you're not alone: between April and September this year 1.9 million applications for unsecured loans were turned down. This is a dramatic increase over the 1.3 million rejected in the previous 6 months. This is just one of a number of measures lenders are taking to pass on their higher lending costs to customers.

So far at least nine lenders have increased the APR of some of their unsecured loans. For example, Bradford & Bingley raised its loan rate by 4% for loans between £2,000 and £2,950. Other significant increases are by Cheshire and Derbyshire Building Society, Goldfish, Norwich Union and RAC Financial Services.

Ray of Hope

All is not lost however, as there are lenders that have kept their loan rates low!

For example, YourPersonalLoan.co.uk, a subsidiary of the Co-Op, offers a rate of 6.5%, along with Barclays' 6.8% unsecured loan.

Not only are these lenders offering excellent deals at such a difficult time, but they also come with a few added benefits. First, Barclays say that if you find an unsecured loan with a lower rate within the first 14 days of taking out theirs, then they will refund the difference.

Also, the loan from YourPersonalLoan.co.uk doesn't use "rate-for-risk", which means the rate you see advertised is the rate you get. There's no "rate for risk".

The only catch to these two loans is that they will only really be available to applicants with good credit ratings. So it is important that you get a copy of your credit record before hand to make any necessary adjustments.

Liam G is a UK based financial author, currently focusing on unsecured personal loans and secured loans.