Rates rise for low value loans
A recent study conducted by a UK based finance site has discovered that the overall cost of low value loans has increased rapidly over the last few months, whilst higher volume loans have remained relatively stagnant.
According to the data, applicants who fall into the sub prime band (less than perfect credit) are amongst the hardest hit with over 50% of all low value loans (less than 5k) procured by individuals whose net income is below the national average. It is suggested that lending institutions are raising the cost of lower value loans in order to compensate for adjustments on certain loan plans, aimed predominantly at the higher end homeowner market.
On average, low value unsecured loans have increased in cost by 1.47% in the last few months. Analysts have also suggested that certain lenders may have implemented rate increases on lower value, higher risk loans due to a rise in bad debt nationally. Typically, the reasons for rate increases on any type of financial product stem from one of two reasons, the first being directly attributed to increases in the national rate of interest and second as a form of protection from negative trends. In this case the latter is most probable.
On the other side of the coin, numerous lenders have reduced the cost of higher value home loans, even though the national rate of interest has increased. The homeowner loans sector is undoubtedly the most lucrative part of the market, and many financial institutions are lowering rates in order to attract the bigger fish “so to speak”.
However, in spite of all this, there are still some good deals to be found on lower value loan plans. The most valuable advice we could give to any person shopping for a loan, is to be thorough in your search and to explore all avenues before you commit.
