Borrowing becomes more expensive as loan rates rise | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 16/04/2020

Consumers looking to borrow through loans and credit cards to help them get through the economic crisis caused by the Coronavirus pandemic will be disappointed to see that some lenders have increased loan rates, while 0% transfer credit card deals are being withdrawn.

Today, both Clydesdale Bank and Yorkshire Bank have both increased the rates on unsecured loans of £3,000 and above by up to 0.4% APR. In addition to this, last week TSB increased the rate on its Existing Current Account Customer Personal Loan by 5.7% APR on borrowing of £25,001 to £35,000 and 6.0% on borrowing of £35,001 to £50,000 for the terms of one to five years. With three high street banks increasing their loan rates in a short period of time, it could be the start of more lenders rising loan rates over the coming weeks.

0% balance transfer deals terms reduced

In addition to some lenders increasing loan rates, the last month has seen credit card providers cut the terms on 0% balance transfer credit card deals. Our research has found that the average term offered on introductory 0% balance transfer deals has fallen slightly, from 534 days on the 1 March 2020 to 532 days on the 1 April 2020, while the number of introduction balance transfer deals has fallen from 73 to 70 during this one month period. In addition to this, during this same period, average balance transfer fees have risen from 2.30% to 2.33%. As well as this, in the two weeks since the start of April, five providers have either withdrawn, added opening restrictions, removed incentives or reduced the interest-free terms on credit cards, including Sainsbury’s Bank, Tesco and Barclaycard. As a result, the number of 0% balance transfer deals and terms could fall further over the coming months.

Competitive 0% balance transfer deals still available

There was some good news for borrowers this week, as yesterday TSB introduced its Platinum 30 Month Balance Transfer Mastercard, which has the longest interest-free term in the chart of 30 months. This card is available to both new and existing customers and has a balance transfer fee of 2.95%. In addition to this, MBNA Limited, Halifax and Virgin Money all continue to offer 0% balance credit cards that offer an interest-free period of 29 months.

Commenting on the current loan and credit card market, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Consumers looking for a new card or loan will be concerned that some lenders have decided to increase interest rates or pull their lucrative offers from sale. However, it is important they act quickly to take advantage of any deals that surface that catch their eye as there is no telling how long these will remain on the shelf. As customers shop around, they would be wise not to make too many loan or credit card applications and instead opt for soft searches to avoid damaging their credit score. It would also be a good idea to check their financial footprint before they apply by checking their credit report.”

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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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