Britons are increasingly opting for loans that are not in their best interests experts have warned, loans that may see them fall into mountains of debt in the future.
The last year has seen loans increasingly hard to come by for those who require it so many have been forced to acquire loan through alternative means, mainly illegal.
The Association of Finance Brokers have urged the government to bring in regulations with regards to the loan market, more stringent guidelines to prevent many opting for an illegal loan with high interest rates.
Robert Sinclair of the AFB said “there is still a surplus of customers who want to borrow. The vast majority of these are not debt distressed individuals hooked on credit. Many are people in need of refinancing to sort out temporary cash flow problems.
"It is good news that the Financial Services Authority is considering regulating the second charge lending industry. It would be seen as a positive step by consumers and consumer groups and we have campaigned for this for some time."
This has been backed up by recent report that has shown that doorstep loan companies are now hitting the most deprived areas of the UK in an obvious attempt to take advantage of the current credit crisis.
UK doorstep lender Provident Financial Plc. said it expects 'high-quality profits growth' in 2008 following a strong start to the year, continuing favourable market conditions and its strong funding position.
Doorstep loans are organisations which lend small cash sums at higher than average rates of interest to people with patchy credit records.
"If you borrow from doorstep lenders, you risk the roof over your heads in return for a day's happiness," said Jon Rouse, chief executive of the Housing Corporation.
Jason Strelitz, Save the Children's UK poverty advisor echoed these sentiments by stating: "Doorstep lenders exploit poor families' inability to get credit from more mainstream lenders, and they cover their risk in lending to the less well off by charging punitive interest rates."
Banks have thus been warned that many personal loans offered to its clientele may not be all together above board.
Unfair Made Fair has concluded that at least 79% of UK loans are unfair, opening the doors for possible compensation claims. The company have confirmed that personal loans totalling between £5,000 and £25,000 fall into the suspect bracket and are open to conjecture.
If after investigation, the agreement is found to be in any way suspect the loan could be rendered meaningless.
Unfair Made Fair director Alan Kneale commented, "The consumer could also challenge any adverse credit associated with an unfair loan, apply to repair their credit file and even sue the lender for unfair damage to their credit file and seek compensation."
He said: "We have anecdotal evidence some high street banks have more than 30 different loan agreements in force and these have been added to, altered, plagiarised, cannibalised and amended instead of being rewritten from scratch, the result being many are unfair.
We believe the end result for the UK’s high street banks will be a return to cautious, thorough and methodical bank managers, lending only to those good for the money," he concluded.