Interest Rates On Personal Loans Set To Increase

Wed, 24 Oct 2007

UK consumers are being advised to check the small print on their personal loans after a uSwitch report revealed that providers in Britain are increasing interest rates in the weeks leading up to Christmas - a period where many people choose to take out a loan to cover excess spending.

But, despite the Bank of England raising rates by 0.25 per cent during the summer, research has revealed that a total of 32 personal loan providers have increased their rates by a further one per cent over the same period.

Personal Finance Expert at uSwitch, Mike Naylor, explained: "The availability of the sub six per cent loan is now just a distant memory - however, the market is vast and there are still competitive rates for those who take the time to compare the offers available."

Deals taken out online have risen by an average of 0.2 per cent, compared to a surprising five fold increase for loans arranged ‘offline’ in branches, or via phone - which have risen by at least on per cent on average.

In addition, seven high street banks have been found to be offering 'personal pricing' services for offline loan purchases.

A personal pricing service enables the bank to charge extra for an individual rate, meaning customers may be paying over the odds for an individual rate rather than being offered the typical APR which could be considerably less if they signed up online .

Naylor added: "There are already huge variations in the loan rates available to consumers amongst both online and offline deals, throwing the personal pricing smoke screen into the melting pot is just causing further confusion."

Although the option of personal pricing may not appeal to many, there are some benefits that it can offer, such as enabling those with a good credit rating to take out a loan with the best possible rate instead of having to pay a flat rate based on the overall risk to the entire population.

But, providing users have access to the internet, loans arranged online are more likely to maintain a low rate of interest .
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