Increase In The Cost Of Personal Loans

The crackdown on mis-selling of payment protection insurance has turned out a rise in personal loans prices.

Since banks and building societies were warned about mis-selling these policies, many lenders faces difficulty in finding other ways to make money on unsecured loans.

This has been attached with several organizations wishing to curtail on the amount they are lending and doing this by increasing rates.

Moneyback Bank and Alliance & Leicester, which were in our Best Buys table for almost 12 months, have raised their rates by up to 1 percentage point.

It has been revealed that a few months ago, someone wanting to borrow £5,000 with these providers could have paid a rate as low as 6.7pc. Whereas, now Moneyback's cheapest rate is 8.4pc after back-to-back increases.

However, the difference in monthly repayments on a loan repaid over five years is £3.76 adding £188 to your total loan repayment.

A&L now charges 8.7pc to those wanting to borrow between £7,500 and £15,000.

Barclaycard and Black Horse have also raised their loan rates by 1 point for those wanting to borrow £10,000. They are now 7.8pc and 7.9pc respectively.

However, by shopping around with a careful research of the financial market there are cheap rates. Asda provides 7.4 pc giving monthly repayments on a £10,000 loan over five years of £199.

For homeowners, a rate of 7.6pc available on internet-only accounts, Sainsbury's Finance has 7.7 pc and Lombard Direct has 7.8pc a month.

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