Personal loan rates rise

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Personal loan rates rise

Fri 14th Mar 2008

Interest rates on personal loans are continuing to rise, with the average rate for all loan amounts now up to 4.6 per cent higher than they were a year ago, according to Moneyfacts.co.uk.

The financial advice website blamed the ongoing credit crisis for the hikes, which has prompted institutions to "concentrate on getting more [money] in the door".

It found that smaller loans have seen the biggest increases - in March 2007 the highest rate on the market for loans of between £1,000 and £2,999 on the market was 19.9 per cent, but that has now risen to 27.9 per cent with the online loan from Black Horse.

Rates for larger amounts have also been affected, with the best rate available on a loan of between £4,000 and £15,000 rising from 5.9 per cent 12 months ago to 6.7 per cent now.

The secured loan market is now shrinking, it found, with eight lenders, including Alliance & Leicester and Picture Financial, ceasing to offer secured loans in the past few months.

"With the effects of the credit crunch continuing to bite, it seems likely that rates for all types of borrowing will continue to increase," Moneyfacts.co.uk predicted.

A number of providers have tightened their lending criteria over the past six months, making it harder for people with poor credit ratings to borrow money.

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