Personal loan rates up to seven per cent
Low rate personal loans 'crunched'
Monday, 30 Jun 2008 18:24
No personal loan rates are now available under seven per cent, as the credit crunch moves to consumer credit.
Latest analysis of the markets by moneyfacts.co.uk show the lowest rate for a personal loan on the market is now 7.2 per cent – from the AA.
This compares with a personal loan best buy this time two years ago of 5.6 per cent.
Over the last two years, monthly repayments on a £10,000 loan over five years have grown from £190.83 to £197.88 – meaning deals are now £423 more expensive over the term of a loan.
Michelle Slade, analyst at moneyfacts, said: “Just like with mortgages, lenders are struggling to raise funds to lend out to consumers.
“As a result this increase is being passed on through the APR offered. With many lenders offering typical rates or personal pricing, it is likely that many customers are being offered a much higher rate.”
She added it was probable that lenders were passing on their increased costs through payment protection insurance, as a way of keeping the rate down.
“In June 2006 the cost of payment protection insurance on the top best buy £5K loan over three years was £470.16. Today that stands at £676.80, an increase of £206.64,” Ms Slade explained.
“At a time when costs across the board are increasing, this will be more unwelcome news for consumers.
“The demand for personal loans is likely to be increasing as more households look to consolidate existing debts. Lenders are tightening criteria and those that can get a loan are finding they have to pay a much higher price.”