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The decline of the Unsecured Loan APR

Cheaper Unsecured Loans

Unsecured loans at affordable prices have finally arrived to the UK with a bang as the move away from the payday loan market continues to gather pace.

Whether it is correct or not the UK public is told to compare loans by the APR. This probably stems from mortgages where an APR comparison is perfectly reasonable – as is with any loan taken over a period of 1 year or more – as it is an Annual Percentage Rate. This is where the payday loan industry has always faced a losing battle – they have always argued that applying a yearly figures (APR) to a product only intended to be taken over a matter of days is unfair and misleading. It is very difficult to argue with them.

Anyway, during the period of 2008 to 2013 it was incredibly difficult to get a loan over a year or more, unsecured, unless you were approved by your bank. There is a good chance that if you are searching online for a loan then you have already explored a bank loan and you either do not quality or the right product simply isn’t available.

Unsecured Loan Lenders Rates Reduced

2014, and predominantly 2015, have seen an increase in loan products available over the 1 year or more loan term with APR’s at less than 100%. This replicates the industry prior to 2008 where the likes of Blackhorse Finance (then owned by Lloyds Bank) and Welcome Finance (then owned by the Cattles Group) dominated the unsecured loan borrowing market with APRs below 100%.

These companies were lending tens of millions of pounds monthly – and not to forget the likes of Citi Finance and Everyday Loans who also contributed towards the mass borrowing of the UK public.
So what is available today? 118 118 Money (yes, those crazy guys advertising online phone directory services) have entered the market with a bang – and as you would expect they have been on the TV a lot. Avant Credit are another that is offering personal loan borrowing, this time at rates sub 50% APR. Other lenders in the market place are the likes of Everyday Loans (still about from the financial crisis in 2007/2008), 1st Stop Unsecured Loans, Hitatchi Personal Finance (offering rates sub 10% APR) and Bamboo Finance.

If you’re aware of the Guarantor Loan market then you may be reading this in despair claiming that unsecured borrowing has been available at the sub 100% APR mark for a few years now – and you would be correct. Guarantor Loans, though, have often been seen as a bit of a niche product – you need someone to willingly be your guarantor for the finance – not a suitable product for all but still a great addition to the UK credit market. Likewise with Log Book Loans and Peer to Peer Loans – great additions to the market – and ones that will continue to grow no doubt.

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