Price comparison websites go sub-prime
THE biggest price-comparison sites are moving further into the sub-prime loan market. Moneysupermarket, the UK’s largest comparison website, has started advertising an unsecured personal loan with a rate of 59.6%.
The Everyday Loans product is offered to those with poor credit histories provoking fierce criticism from debt charities.
Other top comparison sites plan to target sub-prime borrowers. Uswitch will begin marketing sub-prime unsecured loans more prominently this autumn, while Gocompare is in talks with sub-prime loan providers to publish data on unsecured adverse credit loans.The Consumer Credit Counselling Service has said the sites are targeting vulnerable consumers, in pursuit of greater profits.
“Comparison sites are drawing more traffic, and promoting sub-prime loans could lure those with a history of severe credit problems into taking on hugely expensive debt. It’s important vulnerable people seek proper financial advice, something these sites may not offer.”
Consumer groups have queried the independence of comparison sites. Most charge commission to providers often at varying rates, which has raised questions about their interest in plugging certain products. Sites may levy commission when consumers click through to a provider’s website, others receive it when consumers apply for or buy a product.
Moneysupermarket has said: “There is a market for these loans for people who have a poor credit rating, which can arise from missing an occasional payment or not being on the electoral roll.”
The site charges the same commission to all loan providers, they said.
The highest rate of 59.6% is generally applied to small loans of up to £2,500, he said. Someone borrowing that over one year would pay £872 in interest, repaying £281 a month.
