Loans -
Banks To Investigate Before Lending Money - 18/04/2008
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As secured loans grew by £7.4 billion and consumer credit lending also rose by £2.4 billion, according to figures released by Action Credit in February, Banks will now apply toughermeans to tighten lending.
A report by Equifax said banks can not stop lending because they depend on it for profit and survival. But they will be more cautious of those they lend to.
Equifax’s external affairs director, Neil Munroe argued they are unlikely to stop lending. They will, however, tighten the criteria for giving loans to people.
“They will continue to lend money, but will just be a little more investigative when an application is being made,” he explained, adding that this is to make sure that it is the right person who is going to repay them.
This move could lead to a lower level of borrowing, as prospective borrowers could be forced to take on the responsibility themselves, warned Mr Munroe.
He said that it all depended on the individual and the circumstances, as some may be compelled to accept more expensive loans in the absence of an alternative.
He further warned that people rejected by main banks would resort to taking out loans from the next tier of lenders.
Meanwhile, the Bank of England is considering a plan to ease the credit crisis by allowing banks to swap their mortgage based assets for government bonds. This will allow the banks to offer new mortgage loans to borrowers.
Although the central bank would not comment on this issue, it has been widely reported in the media that government sources said a deal to help liquidity is nearly sealed.
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