Personal loan interest rates much higher

April 2, 2008

According to recent figures the interest rates on personal loans are significantly higher than they were one year ago, even though the base rate was the same one year ago as it is now.

Those hit hardest are borrowers looking to fake out smaller loans of around £1000 to £3000, as these smaller loans have seen the greatest interest rate hike.

Consumers looking to borrow £2000 or £3000 can expect to pay around 4% more now than they would have a year ago.

The rates have even risen since January of this year on smaller loans, with a £1000 loan over three years costing around 1.6% more than it would have in January.

The hike on larger loans is not as high, but even on loans of around £20,000 the rate has gone up by around 1% since this time last year.

One industry official said that this situation could go on for some time as a result of the credit crunch, as lenders had to try and recoup the cost of higher inter-banking lending costs through increased interest rates.

He stated: ‘The ongoing credit crisis has seen institutions concentrating on getting money in the door and becoming more expensive and selective when lending money out.’