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Daily Torygraph: 2m Rejected For Loans As Banks Rein In Lending

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At some point the debt merrygoround stops....

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http://www.telegraph.co.uk/news/main.jhtml...5/nloans105.xml

2m rejected for loans as banks rein in lending

By Harry Wallop, Consumer Affairs Correspondent

Last Updated: 2:05am BST 05/10/2007

The number of people being turned down for a personal loan has soared by a third as banks tighten their lending in the wake of the credit crunch.

Nearly two million of those applying for a loan in the past six months have been rejected by banks.

The move is the latest in a series of measures by lenders shaken by the continuing crisis in the financial markets.

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Several banks and building societies have already increased their rates on tracker mortgages in a bid to pass on their higher lending costs to customers.

Yesterday, Abbey raised the rates on its first-time buyer tracker mortgages by a substantial 0.45 percentage points to 6.99 per cent, despite the Bank of England's announcement that it would be keeping interest rates at 5.75 per cent.

Already this week nine lenders have increased the cost of taking out a personal loan by as much as four percentage points.

The latest sign of tougher times is that 1.91 million adults were turned down for an unsecured loan between April and September, according to MoneyExpert, a financial comparison site.

This is a dramatic increase on the 1.39 million who were rejected in the previous six months. Sean Gardner, the chief executive at MoneyExpert, said it was understandable that banks were getting stricter.

He said: "They've been stung by bad debts with borrowers unable to repay the cash and are tightening their lending criteria. A combination of the credit crunch and the Bank of England putting up interest rates has hit borrowers' ability to repay and lenders are reacting."

Banks fund many personal loans in the wholesale money markets, where the cost of borrowing has soared as a result of the credit crisis.

In an attempt to recoup some of the lost profits, many lenders are also raising their rates to borrowers. Some will have to pay an extra £250 over three years for a £5,000 loan.

There are an estimated 12 million adults with £66 billion worth of personal loans outstanding in the UK — more than twice the amount of debt taken out on credit cards, and six times the amount people have on overdrafts.

Two out of every three people take out a loan to consolidate their debt, according to MoneySupermarket, a financial comparison website.

Tim Moss, its spokesman, said: "Everybody is going to have to tighten their belts and many people will be forced to go to a debt management company if they can't get a loan."

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I like the comment at the end of the quote- these poor debtors will have to employ the use of a debt management company! I smell the smell of VI

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I like the comment at the end of the quote- these poor debtors will have to employ the use of a debt management company! I smell the smell of VI

They could always goto the C.A.B. and get their advice for free!!! No one to employ then and they save some money to pay their debtors off!! LOL!!!

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