New data suggests that in the prevailing COVID-19 environment, it is becoming harder and more expensive for consumers to access unsecured personal loans. It comes as Fitch Ratings, one of the world’s Big Three Credit Ratings has noted that they; ‘expect unsecured consumer lending to see significant deterioration in performance.” It is a backdrop that has Deputy CEO Karl Werner noting:

“Economic uncertainty can lead to a tightening of credit, particularly unsecured lending, such as personal loans. This was seen in the aftermath of the credit crunch and there is evidence that this same scenario is playing out now.” 

The challenge for unsecured loan providers has been highlighted by a downgrading in the credit rating of some lenders by Fitch Ratings, driven by their concern about business’ exposure to unsecured consumer credit and the economic fallout from the coronavirus pandemic.

The impact on dealer finance

Werner concludes; “the observations from Fitch and data published by reflect historical trends in previous economic downturns. Dealer finance is not entirely immune from the economic impact, but the nature of HP and PCP finance has usually meant that dealer finance offers a more consistent and accessible form of lending to car buyers.

“This unsecured loan backdrop needs to be viewed as an opportunity for dealer finance to play its role in the reinvention of the dealer model for the ‘new normal’ marketplace. The critical nature of being customer-led and the delivery of fair outcomes is more than just a regulatory shift; it is a cultural one that has been accelerated by the pandemic crisis. Our lead on risk-based pricing with the launch of our new MotoRate model with its highly competitive headline APRs and finance acceptance levels are designed to take on the personal loan providers. Car selling and financing have to change. Together with our dealers we are collaborating to develop the next chapter in our history; the findings to date are very positive.”

Providing a transparent customer journey

As the car buying journey shifts to online, products like MotoRate and Self-Serve are providing a more transparent and clear customer journey. With, we’re giving customers access to 2,500 dealers across the UK where they can complete a decision in principle and tailor their search to their budget, providing a better forecast for dealer finance. 

Press release issued by MotoNovo Finance, June 2020

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