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More Personal Loan Pain for Borrowers

More Personal Loan Pain for Borrowers

Category: Loans

Updated: 31/10/2008
First Published: 06/05/2008

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's not only mortgage rates that continue to increase, so too have the rates and monthly repayments on personal loans.

In the last two weeks alone we have seen Barclaycard (+0.50%), Lombard Direct (+1.0%), The AA (+0.10%), NatWest (+2.50%) and Tesco Personal Finance (+0.6%) all push selected personal loan rates upwards. On top of this Barclaycard has pulled the one time best buy personal loan product offered through its Masterloan brand.

Since the beginning of the year more than half of lenders offering personal loans have made changes to their personal loan rates. Black Horse has increased personal loan rates for those looking for smaller personal loans by as much as 11.0%, adding £52.68 in additional interest over a year. NatWest has increased personal loan rates on the largest personal loans by 1.5%, adding £1,015.20 to the total cost.

But not all lenders have increased personal loan rates

Thankfully it's not all bad news; some personal loan lenders have in fact bucked the trend and reduced personal loan rates in the last few months. Moneyback Bank, Britannia BS, Yorkshire Bank and Clydesdale Bank have all reduced selected personal loan rates since the beginning of the year. In fact anyone looking to take out a £5000 loan with Yorkshire Bank or Clydesdale Bank will have seen personal loan rates reduced by as much as 7.0%.

What should borrowers be aware of?

  • Typical rates – Most personal loan lenders advertise typical personal loan rates but, for some personal loan lenders this is the typical personal loan rate for larger personal loan amounts. The rate for a smaller personal loan may be much higher, so check the personal loan rate they offer for the appropriate amount you want to borrow.
  • Don't assume the rate you see is the rate you will get – A typical personal loan rate has to be offered to at least 66% of accepted customers. This means 34% of customers may be charged a higher personal loan rate.
  • Payment Protection Insurance – Taking PPI from the personal loan provider is very expensive and can add thousands of pounds to your personal loan. If you do require protection, opt for an independent personal loan provider such as paymentcare.co.uk or britishinsurance.com.
  • Shop around - Don't just assume your bank will offer you the best personal loan deal. However, don't make multiple applications as these will leave a mark on your credit file which may mean you get offered a higher personal loan rate or get declined completely.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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