Personal loan rates continue to escalate

Mon, 16 Nov 2009

Customers requiring credit are still facing high costs as personal loan providers continue to profit from elevated interest rates .

Despite the Bank of England base rate remaining at 0.5 per cent, the cost of borrowing sums of £5,000 and £10,000 through a personal loan have rocketed since 2006, research by the Financial Services Authority has shown.

According to the London Evening Standard, the final cost of an average £5,000 personal loan after five years is currently £6,907.59, while a consumer borrowing £10,000 will end up paying £13,033.49.

Vera Cotrell, financial services adviser at consumer watchdog Which?, told the newspaper: "Borrowers are paying the price for other people defaulting and for banks not doing credit assessments properly. No other company could get away with saying, 'Right, we're going to charge you a lot more for this product now because of our losses.'"

Moneyextra.com spokesperson Stewart Farr recently told MSN Money that those looking to borrow cash need to check both the monthly payments and the total cost of the personal loan to ensure they are getting a good deal.
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