Unsecured personal Loans online.

Research carried out by campaign group Compass, claim that most people would like unsecured personal loan rates to be capped. Almost 7 out of 10 people would like the government to increase the current cap rate charged by credit companies. The research was carried out on behalf of YouGov and it consisted of 2,095 people.

Consumers believe that the government should offer better protection to those who do take out unsecured payday loans. The study showed that 68% of people feel that the government should put a cap rate on personal loan interest rates. The study also showed that 69% of people would like the government to promote more affordable means of credit.

According to a further study carried out by Consumer Focus, a Watchdog consumer group, legal loan sharking is on the rise. The amount of people who take out unsecured personal loans and payday loans has actually quadrupled over the last four years. Warnings have been issued by the Association of British Credit Unions about the rates of unsecured loans. Some companies are getting away with charging up to 2500% interest.

This research carried out by Compass is set to test the government to see whether they support lenders or consumers. A Compass official states:

“This is a key test of coalition government’s stated commitment to create a fairer society. Now we need to see if it backs the people or the financiers.”

Compass is part of a pressure group aiming to get prime minister, David Cameron, to take action against the credit sector. When talking about the study, the general secretary of Compass, Gavin Hayes, also states:

“These finding show that the government’s plans for credit reform don’t go far enough. The public feel that just capping excessive credit and store card rates falls short. They want caps on the cost of credit to cover the whole of the unsecured credit sector that causes so much misery for thousands of people in the UK that can least afford it.”

However, there are some people who feel that a capped interest rate would actually harm consumers rather than help them. The Office of Fair Trading has actually looked into the high-cost credit sector and it found that capping the interest rate could lead to other high charges.

There is also the fact that if people find it more difficult to borrow the money that they need, they will turn to illegal loan sharks. Capping the rates could make applying for certain loans a lot more difficult. This is particularly true in the case of those who are not very well off. This means that when the government does look into whether the rates should be capped, they will need to consider the potential implications on those who are less fortunate than others.

Instead of capped rate, some experts believe that more information should be given to consumers. However, for many consumers more information just isn’t good enough. With 68% of people wanting a capped rate, it will be interesting to see who the government backs when the time comes.