Research Point Out Cost Of Personal Loans Increases In Two Months

According to Moneysupermarket.com, the price comparison website, the average rate that a borrower pays for a most appropriate purchase of personal loans of £5,000 has increased from 7.92 per cent during the first week of September to 8.36 per cent.

The rise takes place in spite of the Bank of England slashing the bank rate by 2 per cent during the same period.

It shows the gap between the bank rate and the rate that a borrower pays on a loan has almost doubled in just over two months from 2.92 per cent to 5.36 per cent.

The figures are the most recent evidence of how families are being affected as lenders try to get back to lost profits amid the credit crunch.

Tim Moss, head of loans at moneysupermarket.com, said: "While personal loans are often seen as the 'poor man' of everyday monetary products, there is always a spike of activity post-Christmas and into the New Year when consumers get their finances in hand, and turn over that new leaf. Invariably this comprises merge of store cards, credit cards and overdrafts. But loans are not the cheap form of borrowing they once were in the past.";

He added, however, that rates on personal loans might reduce after Christmas as providers struggle to attract those with New Year monetary resolutions.

Borrowers are advised to maintain a close eye on the effective deals and make sure that they only apply for products they are likely to be accepted for to maintain their credit record as clean as possible and not affect it negatively with failed applications for loan.

Hugo Shaw, of independent financial advisers Bestinvest, said: "In the present climate it will pay to secure your credit rating as gone are the days for cheap credit for those whose credit histories are rather too colorful."

A spokesman for the British Bankers' Association said: "Banks are still providing feasible personal loans and with instant loans, as everything else, it pays consumers to shop around for the deal that go well with them.

News Categories