The Halifax announced yesterday (Wednesday 12th November) that it was to cease offering unsecured loans to borrowers via the intermediary market, which includes loan brokers and financial advisers.

As from the 30th November this year, the lender is withdrawing from the broker market and the only way to obtain an unsecured loan from the Halifax will be to apply directly to them, either in one of their branches, or online via their website.

For someone who may have already applied for an unsecured loan via a broker, this will be unaffected by the decision and the loan will be processed in the normal manner, likewise new broker generated applications will be accepted up to the end of this month.

The decision does not come as a complete surprise, as the Halifax stopped offering new agencies to intermediaries at the beginning of October, although existing brokers were still able to submit loan applications.

A spokesperson for the Halifax explained the decision by saying that the lender was streamlining its operations within its lending business and this move would allow better support for brokers to deal with more complicated areas of finance, such as home owner loans, secured loans and investments, all of which will still be available to brokers and advisers via the Halifax.

Heather Scott of the Halifax said “Intermediaries core business is in the provision of advice for complex personal financial needs. By streamlining in this way we can more closely focus on the core broker advice business, mortgages, pensions and investments.

We continue to offer one of the broadest mortgage and wealth management ranges available via the broker market. Simple personal loans continue to be available either online or direct.”

When an individual is looking for additional funding through a personal loan, whether this is secured or unsecured, a large percentage of people are likely to go straight to their local bank and apply directly, others who want to ensure that they get the best deal they can are more likely to shop around various loan providers to compare the different costs and check whether a secured loan or an unsecured loan is the best option to suit their needs.

What most loan applicants don’t do is to check their own personal credit rating before they start the application process.

A recent study has shown that an individual may stand a better chance of being approved for the loan they want and also receive a more competitive interest rate if they check their credit rating prior to making the application. The survey, conducted by Which? has found that, of those people who checked their credit file, 16 per cent found errors and mistakes relating to their finances, which could affect their overall credit score and in turn, their ability to be accepted for a loan.

There are three major credit reference agencies in the UK, Experian, Equifax and Call Credit, which are used by loan companies to check an individuals credit score and it is possible for a person to obtain a copy of the information which is held on them, for a fee of £6. If errors are found on their file, this can be easily corrected by contacting the company in question, who will then update the information held.

Of all the people interviewed for the survey, only around one third of them had actually checked their credit file before applying for a loan.

Martyn Saville of Which? commented on the survey results, he said “Checking that your credit files are up to date and accurate before you apply for a mortgage or loan could improve your chances and ensure that you don’t end up out of pocket because of an error.”

There have been a number of concerns over the selling of payment protection insurance (PPI) in connection with personal loans and mortgages for some considerable time now, with many consumers not understanding exactly what benefits are offered by such policies, not realising the full costs, or in some cases being sold inappropriate cover for their needs.

As a result of these concerns, along with a large level of complaints from loan customers who have been sold these plans, the Financial Services Authority (FSA) has recently conducted a survey into the selling practices adopted by loan providers in the sale of PPI and it appears that they are not impressed with what they have found.

From the results of the survey, the financial regulator has discovered generally poor practice amongst PPI providers, with non compliant sales processes and is now considering what action to take to remedy the situation. In the meantime, the FSA have suggested that companies should consider stopping selling PPI alongside personal unsecured loans, until the problems have been sorted out.

As part of its research, the FSA conducted several mystery shopper exercises in face to face interviews with regard to taking out PPI at the same time as a personal unsecured loan and found that in the majority of cases, the customer was not told about the cost of the cover and that it was a single premium policy which would be added to the loan with interest charged on it, nor were they told about the main limitations and exclusions on the policy.

Jon Pain of the FSA said “Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure customers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes. Firms may wish to consider stopping selling single premium PPI alongside unsecured personal loans, given the continuing problems in the sale of this product.”

The FSA is working alongside the Financial Ombudsman Service (FOS) in this matter and is expected to publish the next stage of its findings early next year.

Most people in the UK have their own bank current account and the majority of these automatically have an overdraft facility incorporated within it.

In many cases this facility is never used, but a large number of people use their overdraft on a regular basis. In some cases, they just dip into it at the end of the month, prior to being paid, but other individuals may have large overdraft facilities which they use to cover their day to day living expenses and constantly remain in the red with their accounts.

A recent report has revealed that several major high street banks have increased the interest rate which they are charging on overdrafts, without letting customers know about the increases and are achieving this through the small print of the terms and conditions of the overdraft agreements. In some cases, a customer with an overdraft could be charged up to 20 per cent for overdraft interest. It is thought that this is one way the banks are finding to recoup the losses they have made recently in other parts of their business.

For those individuals who are constantly using their overdraft facility, it may well be prudent to check on exactly what interest rate they are paying and then consider alternatives such as taking out a personal loan to repay the debt. Even with an unsecured loan, it could be possible, in some cases, to reduce the interest rate payable by half. In many cases it may even be possible to obtain a cheap loan, compared to the overdraft rate, with the same bank, although how many will actually offer this option to their customers unless they ask for it?

The Liberal Democrats have raised the issue of these charges with the Office of Fair Trading, their spokesman said “This may not be technically illegal, but it is the sharpest of sharp practices. Banks must not be allowed to screw their customers to make up for losses made elsewhere.”

Defending the charges, a spokesman for the British Bankers Association said “Banks offer a range of overdraft and lending products to suit customers’ needs and are constantly reviewing what they offer in the light of demand.”

Over the course of the past twelve months the amount and number of new lending decisions from the main high street banks has dropped dramatically, not only on mortgages, but also in other areas such as unsecured personal loans.

The effects of the global credit crunch have meant that even the big lenders have been suffering from liquidity problems, which have been manifested in much tighter and more restrictive lending criteria for those individuals looking for a loan or other finance.

One area which has bucked this trend is loans to small businesses. According to the latest figures from the British Bankers Association (BBA), the level of new lending to businesses from high street banks has risen by 11 per cent over the course of the past twelve months to June this year, with a total amount of £44 billion being granted as business loans.

Over the same period, the total level of business overdrafts also increased to a figure of £9.2 billion, an increase of 3 per cent. Business saving, on the other hand, only grew by 6 per cent over the year, reaching a level of £54.5 billion.

These figures could be taken as a sign that many small businesses are struggling with their finances and are requiring loans to maintain the business, rather than to expand and also that these businesses are using their cash reserves to weather the credit crunch.

David Dooks of the BBA said “Banks are still providing finance to support small businesses in the slowing economy, despite the impact of the credit crunch on lenders. These figures reflect the economic climate for the small business sector, with borrowing continuing to expand, but deposit growth slowing. In the face of weaker trading conditions, businesses are using all the cash they generate, while those seeking finance are generally taking fixed rate structured loans or using previously agreed facilities.”