Loans - Lax Lending

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With the credit crunch's continuing impact biting down into the UKs financial markets, you would think that lenders would be more careful than ever as to whom they lend their money. This is especially true if you have been denied credit recently.

Recent surveys however, have revealed that this isn't the case. According to one, a mere 30% of applicants in the last 12 months were asked to prove their earnings when applying for a loan!

This is especially dangerous as even though financial products, particularly loans and mortgages have gotten considerably more costly over the past 6 months, consumers have shown no signs of slowing down.

In fact, in January alone consumer debt rose by £900m and over the past 12 months it has risen by £110bn, to a staggering total of £1,436bn!

This has of course resulted in an influx of customers who have taken out loans which they quite simply won't be able to repay - the very factor that sparked off the credit crunch in the sub-prime American markets.

Adding to the issue is consumers' choice to look elsewhere when lending money and not borrow from the banks with which they hold current accounts. This results in lenders having a very limited amount of information on how applicants are going to repay their money.

The solution for this is of course for banks to carry out proper back ground checks before issuing any lines of credit to new customers. For this reason the British Banker's Association has updated the banking code, which is a set of minimum customer standards that should be upheld by all banks and building societies.

These changes came in affect on 31st March and state that all lenders have to carry out a credit check with an independent credit reference agency. Such agencies have a record of nearly every UK adult, detailing all past lending, highlighting any occasions where a payment was made late or missed, any loan defaults etc.