With the current economic situation as it is, it’s difficult enough for someone who has a perfectly clean credit history to be accepted for a personal loan at the moment, but for an individual who may have a bad credit score due to loan arrears, or a County Court Judgement for example, it is even harder to obtain funding through a personal loan at anything close to reasonable rates of interest.

A recent report has now revealed that several loan companies which charge particularly high rates of interest for personal loans are actively target marketing those individuals with a bad credit rating, as these people are usually unlikely to be accepted by a mainstream lender, due to their financial past.

Many people who may be looking for a bad credit loan may be able to find a much cheaper loan by applying to one of the more reputable sub prime lenders and although there are now much fewer of these companies and they would certainly be paying a higher rate than someone with a clean track record, it is likely that they could still save more money than if they opted for a company who offers loans without any credit checks.

Many of these high interest charging companies are targeting more vulnerable, younger customers who may have a poor credit history, often through social networking websites, offering extra cash quickly and easily without any of the hassles of credit checks.

This target marketing is causing concerns for loan industry professionals, who believe many people are not getting the best possible deal available for themselves, apart from the fact that many of these borrowers will be applying for a high interest loan without realising the full implications of what they are taking on.

A spokesman for the credit reference agency Equifax said “We are starting to see a vicious downward spiral. Now legitimate sub prime lenders have been driven out of the market, borrowers are being forced to use less responsible sub prime lenders.”

It is a well known fact that personal finances are beginning to get tough for a large number of individuals with homeowner loans and secured loans on their properties, but it would appear that the situation is actually getting worse according to a recent survey.

The research company Standard and Poor’s has been monitoring the level of arrears on homeowner loans and mortgages since 2000 and has revealed that there has been a 50 per cent increase in the number of borrowers who are in at least one months arrears with their loan, over the course of the last twelve months.

The figures, which are taken up to the end of September this year, have shown that 3.24 per cent of all those loans in arrears are made up of prime loans, where borrowers have previously had an excellent credit rating and no arrears on any previous loans or mortgages, this is double the figure for the same period last year and the highest level since the survey began.

The number of cases which are now in arrears of three months or more has also increased to 1.16 per cent of all homeowner loans, but if bad credit loans are included, this figure rises to 1.44 per cent.

The recent reduction in interest rates may be of some comfort to borrowers who are struggling to keep up to date with their loan repayments, provided that their lender has passed on the full saving to them, but despite this, the level of homeowner loan arrears is continuing to increase at an alarming rate and many experts predict that we are likely to see a large increase in the number of properties being repossessed as we go through 2009.

Since the start of the credit crunch last year, we have seen the total number of available mortgages and homeowner loans decline steadily as lenders withdraw products from the market, due to the increased risk levels associated with certain types of loan and their own problems with liquidity issues.

The worst hit sectors of the mortgage market over the course of the year have been predominantly sub prime and bad credit loans, buy to let mortgages and high loan to value products, as these tend to be the areas which represent the highest level of risk to lenders, although many mainstream loan products have also been withdrawn, simply due to a lack of available funding.

According to the latest statistics from Moneysupermarket.com, in the last week alone the total number of available mortgage and loan products fell from 4,930 to 3,785, a total drop of 23 per cent.

As with previous product withdrawals, most of the casualties over last week were in the sub prime and bad credit loans area of the mortgage market. This shows that many loan providers are still continuing to tighten their lending criteria, which means that it is now becoming increasingly difficult for a potential borrower with anything less than a clean financial history to be able to obtain finance through a mortgage or any other type of loan.

Since April last year the total number of mortgage products offered by lenders has gone down by 86 per cent. Apart from the reduction in the number of sub prime mortgage products, a number of lenders withdrew their two and three year fixed rate loans, although this is possibly in anticipation of a further interest rate cut from the Bank of England at the beginning of November.

On a more positive note, there has been an increase in the number of available tracker rate mortgages and also in the number of lenders offering high loan to value ratios of 90 and even 95 per cent.

It is not only the main high street banks and building societies which are having a hard time in the current economic conditions, but also many other companies in the financial sector, particularly companies which operate in the secured loan and second mortgage markets.

Yesterday (Monday 6th) saw the stock market in the UK suffer huge losses, as the markets waited for the Government to take action to tackle the current economic crisis and another provider of sub prime and bad credit loans had its’ share price hit by the downturn.

Cattles may not be a household name in the UK when it comes to secured loans, but they are the parent company of Welcome Finance, who specialise in second loans and mortgages, particularly in the specialist and adverse credit sector, and are one of the biggest names in the UK when it comes to this type of loan.

Over the course of the last twelve months, since the beginning of the credit crunch, Cattles have seen their share price reducing steadily and yesterday the overall price dropped by 20 per cent. Despite this news, Cattles have said that the company is still strong and is able to survive the current problems and has no plans to withdraw any of its secured loan products from the market place.

David Postings of Cattles, explained the company’s lending process, he said “At the time the loan is written, the customer is employed and has a surplus of income over expenditure. We have reviewed our affordability criteria this year to ensure that we only lend what a customer can afford to repay. We have always maintained a prudent approach to lending and have never sacrificed credit quality in order to chase volumes. We will provide a further update on our second half performance in our interim management statement on 23 October.”

Earlier this week their have been numerous reports on the proposed rescue package for American banks, worth $700 billion, which was launched by the US Government over the weekend, but then rejected by congress in a vote which took place on Monday this week.

The proposal was for the US Government to buy up the banks’ bad debts which they have accumulated on their mortgage and homeowner loan books, in exchange for a share of each of the institutions involved. This plan would hopefully relieve some of the liquidity problems being faced by many of the American lenders and allow the housing and homeowner loan market to move forward.

After the shock rejection of this plan on Monday, the US Government has developed an amended version of the original proposal, which has now been approved by the US Senate by 74 votes to 25.

The new proposal was described by George Bush as “different and improved” and now includes a better level of insurance for the Government and less of a financial burden for the American tax payer. The amendment has now been passed to the House of Representatives for their approval and they are expected to vote on the bill as a matter of urgency, possibly even today (Friday).

Senator Chris Dodd said “The legislation gives the Treasury Secretary the authority to respond quickly and forcibly to the current crisis, while creating strong protections for American taxpayers, helping to preserve the American dream of home ownership and cracking down on excessive compensation for corporate executives who made bad decisions.”

If the proposals are passed it will be positive news for the housing and bad credit loan markets, not only in the US, but worldwide and will hopefully restore some level of confidence to the markets.

Meanwhile, it is expected that France is about to come up with a similar scheme, worth 300 billion Euro, to bail out the European banking sector.