Rushing for unsecured lending?

BenL

I heard a news item the other day and the linked Times article below about people rushing now at the onset of the credit crunch to get unsecured loans and credit cards now in order to continue to fund their high spending lifestyle.

http://business.timesonline.co.uk/tol/business/money/borrowing/article3671094.ece

I guess the rationale for these people is that they need the unsecured debt to pay the increase in bills, mortage costs short term and then in a couple of months/year things will be all rosey in the world and their house price could have started to rise exponentially again so they will have the money or at least equity to pay it off.

The loan capital short term could be used to pay loan repayments but if this continues long term that money will run out, or be spent on the new car/ lcd tv and foreign holidays (what was that loan for again? I forget)

Absolute madness.

The Times article mentions this happened in the USA mid 2007 and look were they are now.

stebiz

BenL wrote: »

I heard a news item the other day and the linked Times article below about people rushing now at the onset of the credit crunch to get unsecured loans and credit cards now in order to continue to fund their high spending lifestyle.

http://business.timesonline.co.uk/tol/business/money/borrowing/article3671094.ece

I guess the rationale for these people is that they need the unsecured debt to pay the increase in bills, mortage costs short term and then in a couple of months/year things will be all rosey in the world and their house price could have started to rise exponentially again so they will have the money or at least equity to pay it off.

The loan capital short term could be used to pay loan repayments but if this continues long term that money will run out, or be spent on the new car/ lcd tv and foreign holidays (what was that loan for again? I forget)

Absolute madness.

The Times article mentions this happened in the USA mid 2007 and look were they are now.

If I was a bank I would 'back off' from lending unsecured funds entirely. Surely there is enough 'less risky' secured business out there at present.

Stebiz

BenL

yeah it seems strange.

On the credit card board people are getting limits reduced, Egg cut out lots of people recently as well.

Maybe the unsecured loan rates people are getting are not the advertised 5.6% but getting put to 11.9% for instance as well.