Consumers are shying away from unsecured loans as recession sets in and unemployment continues to rise, it has been claimed.

According to the Finance & Leasing Association (FLA), consumers are much less likely to secure additional borrowing against their property than they were 12 months ago.

The trend is unsurprising as many homeowners are struggling with their mortgage repayments, let alone other debts, and face repossession if they do not keep up.

Figures from the FLA show that the number of additional secured loans taken out on people's properties fell by 83 per cent in February and is down 65 per cent year-on-year.

This is compared with a 45 per cent decline in the number of personal unsecured loans taken out in February and a 30 per cent fall when compared with 2008.

However, secured loans are generally of a much higher value and people still need credit, so it could be that the large reduction in secured loan finance seen over the past year is down to credit conditions in the wider market.

Posted 30/04/2009 18:18:51