There are many people who have not ventured into the credit markets for many years who now, for whatever reason, find themselves considering a loan product. For those people the landscape of consumer borrowing and the products available has changed almost beyond recognition. Even as recently as 15 years ago traditional unsecured borrowing revolved primarily around three main products;
Traditionally available from the big-name, high street providers with rates typically around the 25% to 30% mark.
Traditionally provided by your high street bank, usually following a chat with your bank manager or personal banker who knew your accounts well.
Again, usually provided by your bank and set up on a traditional instalment basis – i.e. sum advanced on Day 1 with an agreed term, e.g. 60 months (or 5 years) and a set amount repayable each month over the length of the term.
Nowadays there are many different products on the marketplace for an unsecured borrower (check out our articles here for more information on these product types) but even the traditional format of instalment loans has undergone massive changes.
Traditionally unsecured loan amounts tended to start (relatively speaking) at around £1,000 and could go as high as £25,000 – depending on the borrower’s credit history (see later) and their disposable income (in other words whether they could show they could meet the repayments). Instalment loans these days have tended to shift the amounts available downwards, so you can get a personal loan now, on an instalment basis, starting from as little as £300 to £500. This offers much more flexibility for borrowers looking for a little help, for example with an unexpected bill, but wanting to spread the repayments over a period of time.
The same though is true of the maximum amount available, which has also seen a reduction. Today, the high street lenders still advertise maximum loan amounts at around the £25,000 mark but the non-high street lenders offering loans for those with impaired credit (see below) tend to top out at around the £10,000 to £15,000 mark.
Traditional instalment loans tended to be aimed at those with good credit histories and the market for those with impaired credit was really in its infancy. Things have changed radically in this respect over the last 15 years and the market sector for those with poor credit files has grown up a lot. The High Street still dominates the market for those with good credit but the range of products available for everyone else has exploded.
There are numerous providers who are happy to offer their products to people with a whole range of historical credit issues. Of course the rates reflect this (see below) with typical rates being much higher than those available from the High Street lenders.
The huge growth in instalment loan products has resulted in a much wider range of rates on offer – reflecting the wider range of customer being able to access a traditional style instalment loan.
As little as ten years ago the higher rate instalment loan products still tended to be offered at typical APRs of under 100%. Now though typical APRs can seem astronomical in comparison. A quick look this morning found a loan provider offering a £400 loan, repayable over 6 months, with a Representative APR of 1295%, and this is by no means unusual.
Now, there are a couple of important factors to bear in mind;
- The loan amount is a lot lower in this example than was traditionally available. The lender still has to cover the costs of underwriting and providing the loan and make a profit.
- The loan term is a lot shorter than was typically available, which can make the APR seem higher.
With such a huge range of instalment loan products now available (and with such a wide range of rates and terms available) it can seem a confusing place to borrowers who were used to the traditional loan market. If you’re struggling, why not talk to one of our loan experts who can answer your question on the product features, helping you make the right decision for you. We charge no upfront fees and can call you back whenever is convenient for you.