Low Risk Loans in a Down Economy

After decades as a paragon of financial success and stability, Britain’s banking system has been unceremoniously downgraded by Standard & Poor’s and is no longer considered low-risk. What does this mean? Well, for one thing it indicates a lacks of confidence in the economy of the UK. Of course, many of these assessments are based on past data.

What do they consider? To begin with, it cannot be denied that the UK’s economy has seen sunnier days. In fact, it took them longer than most other European nations to emerge from the recession, and when they did they made it out by the skin of their teeth. The numbers are inauspicious to say the least. According to the government, the economy grew by an anaemic 0.1 per cent last quarter, which was less than what was expected.

In the end, the poor economy has affected the credit profile of the banking industry, which is making it harder for banks to loan money at reasonable rates. It also didn’t help that the recession destroyed or nearly destroyed a number of vaunted financial institutions in the UK. Is it possible to receive a low risk loan these days?

Well, yes, it is possible. But the truth is that it isn’t nearly as easy as it once was. The recession has had a profound effect on banks in the UK and they simply do not have access to the same amount of funds. That is why bank lending to businesses fell by nearly fifteen billion pounds in the last quarter of 2009.

And while it is true that interest rates are generally low, the vetting process for loan applicants is much more rigorous than it was in the past. After all, the old methods resulted in a protracted global recession based in part on the lax lending practices of banks in the US and the UK.

For the individual investor, the best thing to do is to be prepared with a sound business plan or the appropriate amount of collateral. The plain truth is that the days of easy money lending have passed and applicants must be better prepared than ever before.

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