The Cost Of An Unsecured Loan Almost Doubles
With the state of the UK economy recently and the effects of the current recession, there has been a lot of talk about loans becoming much cheaper due to the reductions in the base rate of interest over the past six months or so and for those individuals with a homeowner loan, in many cases this has been the case, particularly for those borrowers with a tracker rate loan.
But whilst homeowners have enjoyed the benefit of their monthly loan repayments falling significantly, the same can not be said for those borrowers with a personal loan, particularly an unsecured loan.
A recent survey from Moneyfacts has revealed that the average cost of an unsecured personal loan has almost doubled over the past two years, with interest rate increases of around 44 per cent, compared with the same period in 2007. Two years ago, a typical unsecured loan would charge interest at around 8.6 per cent for someone who was borrowing £5,000.
Twelve months ago, this figure had increased to an average of 10.2 per cent and currently the average interest rate is 12.4 per cent. This means that someone borrowing £5,000 over a three year period will now pay somewhere in the region of £957 in interest over the term of the loan, compared with just £664 for the same loan two years ago.
One analyst at Moneyfacts commented that loan rates could be even higher for some borrowers. Michelle Slade said “With many providers showing just typical rates, the actual increase a customer has to pay compared to a few years ago could be much higher. Tighter lending criteria is likely to mean that only those with a perfect credit history will be getting the best loan rates.”
