Potential Borrowers Pessimistic About Loan Availability
Over the course of the past twelve months, banks, building societies and other lending organisations have been forced to tighten their lending criteria, due to the effects of the credit crunch and the recent banking crisis.
Unsecured loans as well as secured loans and mortgages have all been affected, as a large number of lenders and loan products have disappeared from the market place. This has led many potential borrowers to believe that it is not possible for them to get any kind of loan at the present time, or that the recent restrictions will exclude them from being accepted.
New research from Unbiased.co.uk has shown that consumers in the UK are particularly pessimistic about their chances of obtaining the loan they require and many simply are not bothering applying in the first place as they feel that they will not meet the more stringent lending criteria.
The biggest misconception relates to secured loans, with ten per cent of those interviewed thinking that they would not be able to borrow more than 60 per cent loan to value and a further 18 per cent believing that 70 per cent is the maximum loan to value ratio. In actual fact, the average deposit required on a secured loan is less than 22 per cent and it is possible to get lower than this, although the cost of the loan is likely to increase.
Borrowers are also unsure of the maximum income multiples available on mortgages, with 27 per cent thinking that they could only borrow 2.5 times their salary, and more than half thinking that 3 times is as much as any bank will lend. Once again, this is a pessimistic outlook! The majority of lenders will be prepared to offer between 3.25 and 4 times a person’s salary.
With the high level of negative press which has been directed towards the loan industry over the course of the past few months, it is hardly surprising that many people have taken this view. But if you are one of the many people who has been put off applying for a loan for these reasons, think again, it may not be as difficult as you thought to get a suitable, as well as a cheap loan.
