No more personal loan rates under 8%

Wednesday, 10 December 2008 04:31

There are now no more personal loans with interest rates under eight per cent.

In October, 23 per cent of all personal loans were below eight per cent. Despite the Bank of England cutting the base rates by 2.5 per cent over the last two months, personal loan rates are up.

The cheapest personal loan is now at 8.2 per cent - a rise of 0.5 per cent.

The average personal loan rate - according to data from uSwitch.com - is up 0.13 per cent to 9.31 per cent.

The credit crisis has made it harder for lenders to raise funds - and they are also becoming cautious about who they lend to.

In one case, Moneyback Bank - which consistently offered best buy personal loans - has stopped new lending.

Louise Bond, personal finance manager at uSwitch, said: "The current economic climate is still unpredictable and the cuts by the Bank of England are not being felt by people looking to take out a personal loan.

"We have already seen six loan providers increasing rates over the last month by as much as two per cent. This has marked the death of the sub-8% best buy loan era which is really bad news for consumers trying to consolidate debts."

The rise in personal interest rates - and a drop in lending of 26 per cent - is especially set to hit those borrowing to consolidate debts.

Some 31 per cent of unsecured personal loans are from people looking to consolidate debts and this lifeline now looks like it will be switched off for many as the UK struggles through recession.

Best buy personal loans based on borrowing £10,000 over 5 years

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