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Associate Article

Cheap borrowing gets harder in credit crunch fallout

One of the most widely significant ramifications of the credit crunch for British consumers appears to be that cheap borrowing is becoming increasingly hard to find, especially for those with a bad credit history.

An interesting indication of the changing complexion of the lending market in the wake of the credit crunch came last week when Halifax launched a new 27.9 per cent credit card aimed squarely at people with a poor credit history. Indeed it seems with banks tightening up their lending criteria that it’s likely to be those with bad credit ratings who suffer the most.

Whilst the Halifax card’s astronomically high APR is an isolated example and will surely only be considered by those in financial dire straits there is nonetheless a perceptible trend towards increased interest rates on a whole range of lending products. So whilst the market for 0% credit cards is busier than ever with most of the major banks offering impressive interest free deals for up to 13 months (market leading credit cards from RBS and Natwest for instance still offer 13 months interest free on balance transfers) it is likely that fewer of us will be accepted for the most competitive deals as the market becomes more risk-averse. Making sure your credit rating is A1 could become more important than ever.

In some cases it could even mean that people who might previously have just scraped through a credit card application will now be rejected completely, worryingly this could mean they end up resorting to considerably more expensive means of borrowing .

Halifax though maintains that their new card is targeted at more of a niche market than sub-prime borrowers who may now be struggling to get accepted elsewhere. Alex Barnett, a spokesperson for Halifax said: "What we are doing is providing the opportunity of a credit card to people who for whatever reason – divorce or not being on the electoral roll – may not have been able to build up a credit score".

Financial advisors stress however that borrowers with high interest cards should be wary about such expensive borrowing and try to avoid letting an outstanding balance remain that way for too long.





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