http://www.teletext.co.uk/personalfinance/credit/default.aspxen-gbThu, 16 Jul 2009 15:59:40 GMThttp://www.teletext.co.uk/images/Logo64x64.gifhttp://www.teletext.co.ukThousands of people with secured loans from failed lender First Plus have not seen repayments cut, despite a plunge in the Bank of England base rate.<img src="http://feeds.feedburner.com/~r/news/finance/creditdebt/~4/G6a4au1hTiA" height="1" width="1"/>
Borrowers took out variable-rate loans with First Plus, whose TV ad campaign was fronted by Carol Vorderman.

The lender, now owned by Barclays, was one firm that offered people a chance to wrap up all their debts in "one easy monthly repayment" in the credit boom.

However, First Plus became one of the victims of the crunch when house prices began to fall.

With borrowers no longer willing to secure debts against their home, it shut for new business last July.

As interest rates rose leading up to 2008, the rates on many of the variable loans did too, but after that, when base rate began to fall, most borrowers did not see their loan rate cut.

It is believed about one in three First Plus customers is paying interest of more than 10%.

Some are considering County Court actions under unfair contract rules, claiming the contract is one sided.

A spokesman for First Plus claimed some borrowers have recently had the interest rates they pay reduced. "Our terms and conditions are clear, legal and fair," he said.

"These terms were made completely transparent to customers when any First Plus loan was sold, and a copy was signed by the customer.

"Our conditions do allow us to vary rates independently from base rate."

Plummeting property prices have led to the near-extinction of secured loans as providers pull out of the market.

First National became the 14th company
since mid-2007 to stop lending secured loans earlier this year, leaving just Nemo Personal Loans, Ocean Money and Secure Trust Bank.

Even though demand for the loans is on the rise, providers have been pushed out of the market due to lower profits.

On an unsecured loan the rate is set at the outset and repayments are fixed, but most secured loans repayments move with base rate or Libor.

Secured loans offer people the option to consolidate debts over terms of up to 25 years, but unsecured loans only offer up to a maximum term of 10 years.

Secured loans are appealing to those who wish to reduce monthly outgoings.
Source: thisismoney.co.uk

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