Average personal loan rates soaring

19 November 2007

New research reveals average rates for unsecured loan have reached 9.5%

Borrowers are feeling the squeeze as average rates for an unsecured personal loan of £5,000 have reached 9.5%, new research shows.

But people who take out a £7,500 loan can get significantly better deals, with interest rates as low as 7.97%, the study added.

Four providers now offer loans for £5,000 at less than 7%, and rates now range from 6.7% to as high as 13%.

The credit crunch has seen lenders tighten up their criteria for loans in an effort to insure themselves against defaults.

MoneyExpert.com chief executive Sean Gardner said: "It may seem paradoxical but you will be charged more on average for borrowing less. There are fewer competitive deals around for people borrowing £5,000 than for those wanting £7,500.

"Lenders take the view that those borrowing more are in general a better risk than those borrowing less and offer better rates as a consequence.

"There are still good deals out there if you need a personal loan but borrowers need to be aware that lenders are getting tough on applications and rates."