Lenders turning down small loan applications

The credit crunch is having an effect on the number of small loans that banks and building societies are willing to offer.

Figures from MoneyExpert.com, the independent financial product comparison site, suggest that lenders have refused some 1.38 million applications for small loans in the last six months.

At the same time, lenders have pushed up interest rates on small loans by an average of 1 per cent.

Sean Gardner, of MoneyExpert, said: “The Bank of England has a battle on its hands to restore confidence in the credit markets when lenders react to three rate cuts by actually increasing rates.

“The unsecured loans market is almost mirroring the mortgage market when the issue is not so much rates but availability – whether or not lenders will let you have the cash.”