It seems that lenders are failing to carry out the proper checks that are expected when giving out a loan, and as a result are being neglectful in ensuring that borrowers are able to pay them back. According to Moneyfacts, the average rate on a three-year £5,000 unsecured personal loan has risen to 9.9% in the past year, thereby adding approximately £300 to the cost.

However, this has not discouraged those who wish to take out a loan as figures from the Bank of England show that new consumer credit rose by £2.4bn at the start of this year.

The worry however, is that the majority of loans being taken out are done so without lenders seeking proof of borrowers’ income, and according to uSwitch.com, only 30% of loan applicants in the past year were actively asked how much they earn. Moreover, 45% of consumers taking out an unsecured loan did so with a company other than their own bank, thus the lender has even less information about the borrower and as a result cannot manage the debt appropriately.