Unsecured Loan Rates Continue To Increase
Since October last year, the Bank of England’s Monetary Policy Committee has lowered the base rate of interest for loans on several occasions, bringing the bank base rate to an all time low of just 0.5 per cent.
Although many individuals with homeowner loans have seen their monthly repayments fall significantly, those people who have been looking for a new unsecured loan have not been so lucky. Since the beginning of the credit crunch, the average cost of an unsecured loan has increased dramatically as lenders are faced with growing concerns over increased arrears and default levels.
Whilst the base rate of interest has fallen by 5 per cent over the course of the past twelve months, the average interest rate for an unsecured loan has actually increased by around 2.5 per cent, to reach a typical rate of 11.7 per cent currently. This figure only includes unsecured loans from mainstream lenders, however, as many individuals have recently been declined for a loan from prime sources, due to their credit history, there has been a large increase in the number of loan companies offering bad credit loans for small amounts, with APR rates of up to 80 per cent in some cases.
Sean Gardner of MoneyExpert.com said “High street banks and other loan providers seem to be operating on a completely different planet from the Bank of England and for those seeking unsecured finance at any level, the rate changes must make very unhappy reading.
With banks tightening up on criteria as well as hiking the rates, options for those looking for finance are rapidly running out. Loan providers are increasingly wary and customers with less than perfect credit histories are struggling to find finance. Those customers though should tread carefully when looking at these low value products. Borrowers are obviously more likely to be accepted but risk facing enormous interest bills if they fall behind in their repayments.”
