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Borrowers’ choice of loan providers stoops to 10-year low

Borrowers’ choice of loan providers stoops to 10-year low
Matt Browning
Written By:
Matt Browning

The number of unsecured loan and credit card providers dropped to their lowest recorded levels for 12 and four years, data reveals.

Since December 2023, The AA, Bank of Ireland UK, Post Office Money and RateSetter have left the unsecured loan market, leaving just 26 different providers for customers to choose from.

Providers Wave, Smile and Cashplus withdrew from the credit card sector in the same period, meaning 36 providers offer credit cards, according to Moneyfacts UK Unsecured Lending Trends Treasury Report.

The reduction coincided with a rise in purchase APR on credit cards during March (including card fees), rising by 0.1% in three months to 34.7%, which marks a 4% hike on March 2023’s average.

A mix of card withdrawals, interest rate rises and fees with new cards caused the increase, the report suggested.

Reduction in providers but 0% balance transfer terms are up

Meanwhile, the average term on a 0% balance transfer term on credit cards lifted from 508 days in December last year to 517 days in March. But, following the “watering down” trend of the credit card market, there are fewer providers to borrow with compared to a year ago – dipping by 11 to stand at 61.

Balance transfer fees have also popped up, rising from an average of 2.4% in March from a previous 2.38% price in December.

Borrowers not only have a reduction in places to shop around for their credit cards and loans, but the average unsecured loan rates have surged in the three-month period too.

The average rate on a £5,000 loan stands at 11.5% – its highest point since June 2013. For a £3,000 equivalent, that rises to 17.6% from 16.5% and £10,000 paid back over five years has risen fractionally (0.2%).

Still good value with market options

Rachel Springall, finance expert at Moneyfacts, says that, despite the drop in loan providers, there is still good value to be had with what is on offer.

Springall said: “The credit card market noted a rise to both the number of 0% introductory purchase deals and balance transfers and the interest-free terms in days for these deals – good news for customers looking for a new credit card to move their debts or spread the cost of new purchases.

“Unsecured personal loans are useful for consumers who want a simple fixed repayment plan, but they are costing more in interest. With rates rising across all tiers below £50,000 over the past quarter, borrowers will need to compare deals carefully before they commit.”

Springall added: “Those who want some flexibility with their repayments may instead choose a credit card, but they do need to aim at paying off their debts before interest is applied.”