Personal Loan Rates Go Up 4% – In A Week
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LOOKING to find a few extra pounds to fund the festivities? Act now or prepare to fork out on a lot more in interest.
The personal loan market has taken a battering over the past seven days as lenders hike up interest rates.
In a week some lenders have raised rates up to such a level that with one provider, a £5000 loan taken out last Friday will cost you almost £300 more in interest if you arranged it today.
New figures reveal even the most generous lenders have upped their rates – with more to follow as they aim to protect their margins in an increasingly risky market.
Lisa Taylor, analyst at Moneyfacts.co.uk, said: “This week loan rates have taken a battering, with a total of nine providers hiking interest rates on some tiers by up to 4%.
“The last nine months has seen a steady increase in the rates available for unsecured personal loans.
“Only four months ago sub 6% rates were available, whereas today you would be hard pushed to get your hands on a rate of less than 6.9%.
“With increasing uncertainty in the financial markets, rising levels of bad debt and a year of interest rate rises putting pressure on our disposable incomes, its comes as no surprise to see lenders increasing margins in what has become a far more risky environment to do business.”
One of the worst offenders is Bradford and Bingley, which has cranked its unsecured personal loan rate 3.2% to 9.9%.
It means a £5000 loan taken over 36 months would cost another £290.52 over the life of the agreement.
Cheshire and Derbyshire BS has increased its rates on some tiers by 3%, and even troubled Northern Rock has upped the ante.
The North East lender has increased its rates by 0.5%, adding £32.40, or 90p a month to its £5000 loans.
Lisa said: “If you are looking for a personal loan, make sure you shop around for the best deal.”
But don’t assume a personal loan in the current climate is the best way to get credit.
Lisa said: “There are still some great 0% deals in the credit card market, with up to 15 months’ 0% on purchases and balance transfers, but these only make sense for short-term borrowing.”
The advice comes after we told yesterday how a scheme to help vulnerable people avoid falling prey to loan sharks is about to offer its 500th loan.
Non-profit organisation Scotcash, arranged with support of Glasgow City Council for people turned away by banks, has approved 486 loans worth more than £250,000 in seven months.
