Personal Loan Rates Rise As Market Shrinks

Wed, 30 Sep 2009

The number of personal loan products available to UK consumers has fallen by nearly 40 per cent over the last twelve months, according to new research by uSwitch.com.

Data from the price comparison and service switching site shows that there are currently 36 personal loans available, down 37 per cent from the 57 loans that were on the market at the same time last year.

It also reveals that interest rates on unsecured personal loans have increased since the start of September, with Marks and Spencer Money, Egg and Alliance and Leicester pushing up rates on selected personal loans by 1.2 per cent, 1 per cent and 0.1 per cent respectively.

Louise Bond, personal finance expert at uSwitch.com, explained that personal loans providers are offering their best rates to existing customers in a bid to reduce the risks of lending .

"As consumers struggle to make ends meet and manage their finances, loan providers are looking to offer the best rates to those whose financial behaviour they can closely inspect – which are their existing customers," she said.

"Last year 1.3 million consumers used an unsecured personal loan for debt consolidation purposes. However, with the number of personal loans available dropping by 37 per cent this year and rejection running high, it would be highly unlikely that a similar number of consumers would be able to consolidate their debts this year."

She added: "For those that are thinking about, or attempting to do this, it would definitely be worthwhile finding out what rates existing providers can offer, as it seems loyalty is one of the only aspects that could win consumers better interest rates at the moment."
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