Cost Of Personal Loans Soaring

Wed, 26 Aug 2009

UK lenders have once again come under the spotlight as new figures show the average rate charged on a personal loan has soared by more than 40 per cent over the past five years.

According to financial website Moneynet.co.uk, people looking to take out a £5,000 personal loan can now expect to pay interest in the region of 12.27 per cent, up from an average rate of 8.71 per cent in August 2004.

The increase in average APR comes despite the fact that the Bank of England base rate has fallen from 4.75 per cent to a record low of 0.5 per cent during the same period.

Andrew Hagger, from Moneynet.co.uk, said: "Whilst we all knew that loan providers were operating on much bigger margins in this post crunch period, it is quite shocking when you realise just how much the cushion has grown."

"When credit was plentiful lenders were keen to offer low rates to get high volumes of business, hopefully with the payment protection icing on the cake."

"Now the situation is totally different, credit is tight, bad debts are rocketing and loan providers are far more cautious but operating on a vastly increased margin."

The steep rise has been attributed to higher funding costs caused by the downturn in lending, as well as reduced competition in the loans market.

Only 29 lenders are currently active in the UK market, less than half the number that were operating in 2004, according to Moneynet.

Lenders are also having to up their interest rates to compensate for the loss of revenue caused by the FSA’s ban on the sale of single premium payment protection insurance ( PPI ).
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page

Copy and Paste the following HTML into your page.

Credit Crunch Savers
HSA Dental Plan
Get covered from £7.70 per month!
Amex Cash Back
Credit Card
Get 5% cash back on purchases with Amex
Income Protection Insurance
Get an instant quote with the award winning company