Credit squeeze hits as missed loan payments increase

More than 7,716 loan repayments are going unpaid every day as the recent Bank of England rate rises start to bite, new MoneyExpert.com research shows.

Up to 1,389,000 repayments on personal loans have been missed in the past six months, the independent financial comparison website says. That works out at around 231,502 repayments missed a month, or around 7,700 each day.

And MoneyExpert.com warns the squeeze on consumers’ finances is set to get worse if the Bank of England raises rates again over the summer. This year has seen two rate rises on top of two last year taking the base rate to 5.5 per cent with experts predicting another possibly as early as July.

Around three per cent of loan customers have missed a repayment in the past six months compared with around two per cent in 2006.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “This is yet another warning of real financial distress and a sign that finances are being stretched to the limit by recent interest rate rises.

“The concern has to be that people are missing repayments on unsecured loans because they believe there’s not as much at stake as missing a mortgage repayment.

“Missing repayments is not a way to manage your finances. People doing that are risking damage to their credit rating and, potentially, court action. Burying your head in the sand is not the way to deal with financial problems.”

Analysis shows best rates are currently around 6.5 per cent with more than half of all personal loans on the market offering a headline rate of below eight per cent. However there are firms offering rates of nine per cent or more and the highest is around 28 per cent.