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Unsecured loan rates soar

Unsecured loan rates soar

Category: Loans

Updated: 07/05/2009
First Published: 07/05/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Borrowers looking for an unsecured personal loan have seen rates almost double in the last two years.

Data from Moneyfacts.co.uk shows an average increase of 44 per cent since 2007. Even the recent slashing of the base rate has failed to help consumers, as it has had no impact on personal loans.

Figures show that borrowers looking for a unsecured loan of £5,000 can now expect to pay an average rate of 12.4 per cent, compared to 10.2 per cent 12 months ago and 8.6 per cent two years ago.

A customer will now pay interest of £957 over a three year period on such a loan; in May 2007 the amount would have been £664.

The rate of interest on loans of £1,000, £10,000 and £25,000 has also increased markedly over a one and two year period.

As Moneyfacts.co.uk's analyst Michelle Slade, observed, borrowers could in fact actually end up paying more: "With many providers showing just typical rates, the actual increase a customer has to pay compared to a few years ago could be much higher.

"Tighter lending criteria is likely to mean only those with a perfect credit history will be getting the best rates."

To get the best rate possible, consumers need to shop around, rather than just accepting the first loan they are offered by their bank. Moneyfacts.co.uk's comparison tables are a good place to start.

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 Any products featured may be withdrawn by their provider or changed at any time.