Personal Loans 'Becoming More Expensive'
Consumers may find cheap UK loans are harder to come by, reports an industry expert.
Pointing towards research carried out by Moneyfacts, Michelle Slade, analyst for the personal finance publication, revealed that interest rates on unsecured personal loans have surged over the course of the last 12 months. It was claimed that loans are currently an average of 4.6 per cent more expensive than they were in the same month in 2007.
However, it is possible that those looking to take out loans of smaller amounts could be coming under more pressure. Moneyfacts revealed that in March of last year the cheapest rate available on a UK personal loan of 1,000 pounds stand at 14.4 per cent. In the space of 12 months, however, this has risen by 4.6 per cent to 18.9 per cent. Meanwhile, consumers borrowing 2,000 pounds will now pay an average of 17.9 per cent interest, up by 3.9 per cent from a year ago. Furthermore, it was indicated that the highest rate charged on loans of between 1,000 pounds and 2,999 pounds is at 27.9 per cent.
Ms Slade said: "Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years. concentrating on getting money in the door and becoming more expensive and selective when lending money out. "
Loans for higher amounts were also shown to be more expensive, with the typical rate of interest on borrowing 20,000 pounds and 15,000 pounds going up by 1.2 and 1.3 per cent points respectively in the last 12 months. Such personal loans now attract interest of 8.1 and 8.2 per cent.
It was also disclosed that money lenders are continuously taking steps to tighten their borrowing criteria, with the vast majority (97 per cent) of loans on the market now having typical rates or a personal pricing policy. This, it was reported, will see people with "less than perfect" credit scores either refracted a loan or forced to borrow at a more expensive rate.
"With the effects of the credit crunch continuing to bite, it seems likely that rates for all types of borrowing will continue to increase," the Moneyfacts expert pointed out. However, she stated that secured loans may be incrementally taken out by homeowners to supplement their spending as the availability of 100 per cent loan-to-value mortgages diminishes and 125 per cent products are no longer accessible. After this, rates on UK secured loans have also been rising, with Picture Financial and Alliance & Leicester among those which have drawn such products in recent months.
As such, those looking to take out a cheap loan to help supplement their spending may be advised to act immediately. By selecting a loan it is possible that borrowers can meet numerous demands on their spending and be left with a single low-rate repayment to make. However before doing so, it is advisable for consumers to carry out as much research into the market to ensure that they are getting the cheapest loan possible.
Earlier this year, Sean Gardner, Chief Executive of MoneyExpert, reported that prospective borrowers should do extensive studies into what loans are on offer as "there are still some good deals to be had". Research from the firm also showed that one in 50 Britons were unable to make a personal loan repayment in the six-month period leading up to December 21st due to increasing living costs.