'Growing number' rejected for loans

The proportion of people being accepted for a personal loan has fallen every month since April as lenders tighten their lending criteria, according to financial website moneysupermarket.com.

The group said in April this year that about 67% of people were having applications approved, but this had fallen to just 52% last month, despite application volumes remaining constant.

The increase in the number of people being rejected is in line with a similar pattern seen with credit cards, with 17% more people having credit card applications turned down in the six months to the end of September than during the previous six months, according to figures from website MoneyExpert.com.

Tim Moss, head of loans at moneysupermarket.com, said: "Clearly some people who should be offered loans aren't getting them at the moment. The banks are denying they are getting choosy, but our findings show they are and many deserving Britons are suffering because of it.

"Loan acceptance rates are decreasing, showing that now, more than ever, providers are looking for lower-risk customers to help reduce the chances of having bad debts on their books."

Meanwhile financial information group Moneyfacts.co.uk said three players had pulled out of the personal loans market during the past week, including Liverpool Victoria, while other providers continued to raise their rates.

Samantha Owens, head of personal finance at Moneyfacts.co.uk, said: "Competitive loan rates can still be found, especially if you are borrowing larger sums of money. But as rates continue to rise and lenders begin to withdraw from the market, it could look a very different picture in a few months' time.

"Rates have been rising gradually for some months, with competition putting increased pressures on margins and bad debts on the increase.

But the credit crunch seems to be the final nail in the coffin, as lenders continue to raise rates but more surprisingly withdraw their products all together."