According to personal finance researchers Money Facts, those borrowing £5,000 will pay an extra £262.27 in interest because of the increasing cost of borrowing today as compared to past 18 months. Personal loans are applied by the borrowers to fulfill all their financial requirements, but with increasing cost on them have turned down people to tackle such higher rate with their fixed salary to depend on.
 
It has been reported that there is a increases in the prices of personal loans, which has put several borrowers under pressure of unable to pay back the loan on time. With a fixed salary to rely on it is extremely difficult to cope with the higher interest rates come up with personal loans.
 
It has been revealed that the average rate on a £5,000 unsecured personal loan has increased by 3.4 per cent from 8.6 per cent in June 2007 to 12 per cent today. And the typical rate on a £1,000 loan has increased by 2.5 per cent from 17.2 per cent to 19.8 per cent over the same period.

 
The higher the amount borrowed, the larger the impact of rise in rate. A £25,000 loan with a 2.2 per cent higher rate than past 18 months costs an extra £1,468.63 in interest.
 
An increase in the price of personal loans blow up in spite of a sharp decrease in the Bank of England Bank Rate, which has been slash from 5.75 per cent in July 2007 to just 1.5 per cent today.
 
Analysts expected that the deteriorating economy will lead to a further 0.5 percentage point reduction in the Bank Rate next month.
 
Michelle Slade, analyst at Money Facts indicates "Increasing unemployment and a diminishing economic point of view have meant the risk of people defaulting on unsecured lending has risen. Therefore, borrowers are paying a considerably bigger amount than they were past 18 months.
 
"With stricter lending terms and conditions, it is now much difficult to be accepted for a loan and if you are, you will be paying a premium for the benefit."
 
According to Andrew Hagger of Money net stated that "although we have seen a sharp drop in the base rate, we are living in unsure times and the downturn has meant that lenders have raised their costs to allow for increased risk of defaulting."