Personal loan rates at highest in a decade
May 23, 2011
It has been reported that rates on personal loans in the UK have reached their highest level in a decade, making it even more important for consumers who are considering taking out a loan to ensure that they compare the rates being charged carefully. The base interest rate is still at its all time low of just 0.5 percent, but despite this the rates on personal loans have soared to their highest in ten years.
Smaller loans in particular have been hit with these high rates, with the average rate on a loan for £5000 now coming in at 12.7 percent, which is the highest it has been since May 2000. There have been many fluctuations in personal loan rates over the past decade, with rates falling as low as 7.8 percent in May 2006. However, rates have been rising since this time and are now edging towards the May 2000 high of 13.1 percent.
One industry official said that one of the reasons behind soaring loan rates was that lenders were taking huge risks with personal loans that were unsecured because there was no collateral to provide them with the security that the loan would definitely be repaid one way or another. In the current climate this is a huge risk for banks and therefore they are charging much higher rates to cover themselves for this risk.
She added that it was very important for people to compare loans for the best deals before making any commitment, as otherwise they could end up paying over the odds.
She stated: “Most people’s first port of call for a loan is their bank, but in most cases this is far from the cheapest option. The price war between supermarkets isn’t just on groceries, it has spilled over into the personal finance market. On nearly all loan amounts the supermarkets have the most competitive rates.”
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