Crunch causing spurt in ‘high cost credit’

Posted 2008-02-28

Overall disposable incomes are down as a result of the credit crunch and consumers are increasingly finding themselves considering high-cost loans, it has been claimed. Debt charity Credit Action said that although people are "reeling in" their spending across the board, still there remains a need for access to credit. But with the ongoing difficulties in global financial markets, most financial institutions have tightened their lending criteria and for many Brits high-cost borrowing is now the only viable option. "Credit is less widely available so what we will see is a certain amount of growth in higher-cost credit," asserted Credit Action director Chris Tapp. He added that whereas most people will have had little difficulty taking out a credit card in previous years, changing macroeconomic conditions have forced a number of borrowers out of the market. And that leaves them with little choice but to rely on less favourable alternatives such as store cards and unsecured loans, Mr Tapp concluded. Debt Help UK estimates that the average British adult has five times as many credit cards as their European counterpart.

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