Loan rates at seven year high
Michelle Slade, analyst at Moneyfacts.co.uk, comments:
“The last month has seen another flurry of lenders increasing rates on personal loans. As a result, borrowers are facing the highest levels of repayments seen in the last six years.
Date |
Lender |
APR |
Monthly repayment |
August 2008 |
Moneyback Bank |
7.6% |
£155.27 |
August 2007 |
Moneyback Bank |
6.3% |
£152.48 |
August 2006 |
Moneyback Bank |
5.6% |
£150.98 |
August 2005 |
Northern Rock |
5.7% |
£151.08 |
August 2004 |
Liverpool Victoria |
6.0% |
£151.74 |
August 2003 |
Lombard Direct |
6.6% |
£153.03 |
August 2002 |
Abbey National |
7.1% |
£154.11 |
August 2001 |
Northern Rock |
8.5% |
£157.19 |
Figures are based on a £5K loan over 3 years |
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“The table above shows the cheapest deal on offer for a £5K loan, but many consumers going straight to their bank could be paying a much higher price.
“In the last few years the market for personal loans has been extremely competitive as lenders and borrowers alike cashed in on the availability of cheap credit. Increased competition pushed prices down and lenders continually undercut each other in order to top best buy tables.
“Since August 2006 the average rate on offer for a £5K loan over three years has increased by just under 3%, from 8.1% to 11.0% today. With no real signs that conditions are going to get better in the near future, rates could get much higher yet.
“This is extremely bad news for consumers who may be considering consolidating existing debts to try to drive down their monthly expenditure.
“At a time when every penny counts, if you need a personal loan, you need to make sure that you shop around as it is highly unlikely your bank will offer the best deal. Currently on a £5K loan there is a difference between the cheapest and most expensive loan of £25.55 per month, which equates to £919.80 more over three years.
“Another point to bear in mind is payment protection insurance (PPI). This is where most companies make their money and the amount charged varies from lender to lender. A loan that offers the lowest rate without PPI may not be the cheapest loan once it is included. If you need PPI, it is worth considering independent providers who offer the same level of cover at a much lower price.”Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
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