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A host of lenders have raised their interest rates on personal loans, some by as much as 4%, as growing uncertainty in the financial markets takes its toll on the lending market.

A total of nine different providers have pushed up their rates in the last week alone, according to the financial comparison website Moneyfacts.co.uk.

The biggest rise came from Bradford & Bingley, where interest on loans between £2,000 and £3,000 went up to 17.9%, a jump of 4%.

For loans between £5,000 and £7,500, the building society raised its rates by 3.2%, up to 9.9%.

Repaying the loan over 36 months, the new rate translates to an extra £8 a month or £290 in total for borrowers.

Meanwhile, Cheshire building society and Derbyshire building society raised their rates to 9.9% – an increase of 3% – for loans between £5,000 and £7,500.

Northern Rock also joined in the rates hike, with an increase of 0.5% on loans up to £25,000.

Sudden surge

Lisa Taylor, analyst at Moneyfacts.co.uk, said the sudden surge in rates came as no surprise given the growth in consumer debt, interest rate hikes and general uncertainty in financial markets.

“To be honest, the changes this week probably more closely reflect the current financial market,” she said.

“There were some very low rates around before that, whilst being good news for borrowers, were unsustainable for the banks.”

Bradford & Bingley said it had held off putting up rates for 18 months and the new rises brought them in line with other lenders.

A Bradford & Bingley spokesman said: “The current financial climate has certainly helped push these changes in the market.

“Although this looks like a big rise it actually brings us on a par with our competitors.”

The last nine months has seen a steady increase in the rates available for unsecured personal loans.

Up until four months ago, rates of less than 6% were available. However, the lowest rates now stand at around 6.9%.

Lisa Taylor said borrowers should consider looking elsewhere if personal loan rates continued to go up.

“Don’t assume a personal loan is always the best method for refinancing or making purchases on credit,” she said.

“There are still some great 0% deals to be found in the credit card market, with up to 15 months’ 0% on purchases and balance transfers, but these only make financial sense if you are looking for short-term borrowing.”

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Despite the Bank of England holding base rate unchanged at 5.75 per cent this week, borrowers have seen the cost of personal loans rise by up to four percentage points as the impact of the credit crunch hits home. Nine banks have raised the rates charged on personal loans this week, say independent statisticians Moneyfacts.

Rates have already shot up by almost a quarter over the last year, according to figures released by the Bank of England this week.

However, this statistic does not take into account this week’s rises.

Bradford & Bingley increased what it charges on loans of between £2,000 and £2,950 by four percentage points to 17.9 per cent. It also increased rates when borrowing from £5,000 to £7,450 by 3.2 percentage points to 9.9 per cent .

A Bradford & Bingley spokeswoman said that the group had frozen its loan rates for the past 18 months, but had now increased them after five interest rate rises in the past year, as well as higher borrowing costs due to the current turmoil in financial markets.

The Cheshire and Derbyshire Building Societies both raised rates on loans between £5,000 and £7,450 by a third to 9.9 per cent .

Crisis-hit bank Northern Rock added half a percentage point to the interest charged on its personal loans, pushing the rate for all amounts borrowed up to 7.9 per cent .

A borrower taking out a £5,000 loan from the Cheshire at 9.9 per cent would now pay £161 a month against £154 on the old rate of 6.9 per cent , which over a three-year term would add an extra £255.

The increases only affect new customers and not existing ones.

Experts blame the rate rises on increasing uncertainty in the financial markets, rising levels of bad debt and a year of interest rate rises putting pressure on disposable income.

Lisa Taylor, analyst at Moneyfacts, said: “It comes as no surprise to see lenders increasing their lending margins in what has become a far more risky environment to do business.”

Borrowers should look around for the best rates because choosing the wrong loan means you could end up paying more than twice the amount you need to in interest. The cheapest unsecured personal loan when borrowing £5,000 over three years would cost you £152 a month from Yourpersonalloan.co.uk, at a rate of 6.3 per cent .

Yet if you borrowed the same amount at a more expensive rate of 12.9 per cent from insurer LV=, previously known as Liverpool Victoria, it would cost £167 a month, adding an extra £513 to your bill over three years.

Instead of the “buy now, pay later” mentality that has dominated the high street in recent years, financial advisers recommended saving up to make a purchase rather than relying on credit.

Sue Hannums, of independent financial advisers AWD Chase de Vere, said: “We have been lucky in recent years with low interest rates, which means borrowing has been cheap. But the tables have now turned. Borrowing is not that cheap any more and people need to look at other options. Now is the time to start saving up to buy things, instead of using credit.”

Anyone who finds themselves overstretched should draw up a budget to find out where they are spending their money and how they can make savings on everything from their utility and mobile phone bills to their weekly food shopping.

Philippa Gee, of IFAs Torquil Clark, also advised borrowers to reign in their spending. She said: “Rate rises on personal loans are not the only increase in costs that will hit the family budget.

“In the months ahead, many homeowners are going to be hit with higher interest rates on their mortgage and there is also Christmas ahead which is always an expensive time of year. If the credit crunch continues, we are likely to see more rate rises. You need to reduce your debts as soon as possible, starting with those with the highest interest rate such as credit and store cards, and limit your spending and expenditure as much as possible.”

Ms Taylor added: “The golden rule for any form of debt consolidation is to cancel, close and cut up your existing forms of credit.”

Golden rules

Look around for the lowest interest rate, or risk paying hundreds of pounds more than you need to over the term of the loan.

Avoid further borrowing if you take out a loan to consolidate debts, by cancelling existing forms of credit, and not extending credit card and overdraft limits

Resist the “buy now, pay later” mentality by saving up to buy goods and services, rather than using credit

Consider your expenditure and look at where you can make savings

Draw up a monthly budget and stick to it