Average loan rates rise over 9%

Wednesday, 01 July 2009 11:34

The average personal loan rate is rising to now stand at 9.07 per cent - from 8.74 per cent four weeks ago.

The increase comes as the Bank of England maintains the base rate at 0.5 per cent - but lenders often price personal loans on the risk they face on default, which is increasing as the UK unemployment is expected to top three million.

Data from uSwitch.com shows the small in interest rates, results in the interest paid over five years on a £10,000 loan is up from £2,283 to £2,371.

However, the better rates are available, but they are being reserved for existing customers.

There are 13 deals available for existing customers with an average rate of 8.5 per cent.

Barclays, for example, offers personal loan rates from 9.9 per cent for new customers but from 8.8 per cent for existing customers.

Meanwhile nine lenders are offering loans only to existing customers.

Louise Bond, personal finance expert at uSwitch, sent out the curious message that it may not be best practice to scour the market for the best personal loan rates.

"At the moment, loyalty really is king and many consumers could find a preferential loan rate with their existing provider," she said.

"It's definitely worth finding out what they can offer you before you search the rest of the market."

Ms Bond added: "Much as we understand that the banks are struggling, these are big hikes for people to swallow. With all eyes on mortgages and savings, it seems loan providers are slipping under the radar slightly."

Personal loan best buys

(Source: uSwitch.com, 24/06/2009)

• Tags:
• loans
,
• news
,
• personal loan