Tenant Loans vs. Credit Card Debt

Take Advantage of Lower Interest Rates on Unsecured Loans

Jan 10, 2009

Whilst no debt problem is ideal, choosing between tenant loans and credit card debt is a decision most borrowers will have to make. Are unsecured loans really preferable?

Against a backdrop of falling Bank of England base rates, the rate of APR on both tenant loans and credit card debt is actually rising. Reports indicate that rejection rates are on the increase. It is estimated that 1.39 million people have had unsecured loan applications rejected since the beginning of the credit crunch.

Sean Gardner, the Chief Executive of MoneyExpert.com stated that "December is normally a time to give, not it seems if you're a loan provider. With unemployment on the up, lenders are increasingly thinking twice before offering money they're much less sure they'll get back. The cost of this risk is being passed on to us all with higher APR's and fewer products available."

Rising APR on Credit Card Debt

It is argued that interest rates need to increase because of the increased probability of default. According to figures from MoneyExpert.com, the average rate of APR on credit card debt is currently 17.59%, compared to 16.8% in November 2007. Conversely, interest rates are also 4.25% lower than they were.

Rising APR on Tenant Loans

Research from uSwitch.com reveals that consumers taking out best buy unsecured personal loans could expect to pay £1.2 billion more in interest than they would have if they took the loan out just over a year ago. In the past 13 months alone, these "table topping loan deals" have risen from just 6.1% APR to 7.4% APR for £8,000 over four years.

Lower Number of Personal Loans Available

According to MoneyExpert.com, the number of available unsecured loans has almost halved since the start of 2008. This is a clear sign of the banking sector's reluctance to lend. Not only is this stifling prospects for recovery, it is also making it harder for people to consolidate credit card debt.

Are Unsecured Loans Better than Credit Card Debt?

Only a few months ago it was widely accepted that high APR credit card debt should be consolidated by taking out an unsecured loan. Lower interest rates are not a reality for many borrowers and increasing numbers are finding it virtually impossible to secure a tenant loan.

Getting a Tenant Loan from Zopa

Those that have an excellent credit history may wish to consider taking out an unsecured loan through Zopa. Their rates are amongst the most competitive on the market. The way Zopa works is completely different as private individuals are the lenders, not the banks.

Whether an unsecured loan or tenant loan is the preferred option is going to depend upon accessibility and the rate of APR offered. Those with a poor credit history are going to find it virtually impossible to get the lower interest rates.

The copyright of the article Tenant Loans vs. Credit Card Debt in Personal Loans is owned by Asa Ghaffar. Permission to republish Tenant Loans vs. Credit Card Debt in print or online must be granted by the author in writing.