Secured loan market shrinks

by Gill Montia

Story link: Secured loan market shrinks

The credit crisis has seen a dramatic shrinkage in the number of UK providers of secured loans, which are commonly used by people wishing to consolidate debt.

Last week, Barclays announced that it was withdrawing its FirstPlus loans from 9th August because of a downturn in business.

Financial website moneyfacts.co.uk has since reported that seven other companies have withdrawn, listing Alliance & Leicester, Breeze Loans, Capital One Bank, LoanOne Intermediaries, Money Partners, Picture Financial and SPPL as the providers to have exited the sector since last summer.

According to moneyfacts, consumer demand for secured loans by second charge has not diminished because the loans can be used by consumers to consolidate their debt over terms of up to 25 years.

Unsecured loans will normally only offer such a facility for up to ten years.

However, secured loan specialists are facing the same funding difficulties as mortgage lenders.

In addition, falling house price have made this type of loan more risky, particularly as the properties against which loans are charged already have mortgages.

Barclays attempted to sell FirstPlus last year but failed to find a buyer who would offer the value of its loan book.