Borrowing pain continues as loan rates increase again
Family finances continue to be stretched, causing many to consider consolidating existing debts into one loan as a means of reducing monthly outgoings.Borrowers, however, will find that the reduction may not be as great as expected.
14 lenders have increased loan rates in the last month, with two lenders, AA and Tesco Personal Finance, increasing rates twice.
Abbey has increased rates by 5% to 12.9% on loans of less than £4,950. If a consumer borrows £4,950 from Abbey, they will be charged around £165 per month, totalling £5,940 over three years. If they borrow £5,000, the rate drops to 7.9% and they will be charged around £156 per month, totalling £5,616.
This equates to £5,616 over three years, meaning they would save around £324 over the period by borrowing £50 more!
One lender, Moneyback Bank, has bucked the trend and reduced rates by 0.20%. The lender pays 7.6% on loans of between £5K and £20K, putting it just below a market leading product.
Anyone looking to consolidate their debts needs to make sure they shop around. Remember that if you do opt for payment protection insurance, the lowest rate doesn't always equal the cheapest loan.
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