Rates on personal loans 'up by almost half'
08 March 2010 14:09:25
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| Personal loan rates have increased considerably since 2008. |
Personal finance group Defaqto conducted a study which found that the average APR on a £5,000 loan is now 13.9%, compared to the previous figure of 9.8%, the Independent reported.
The company explained that banks are hiking their rates in order to discourage the type of reckless borrowing which threatened their existence as the economy slid into recession.
"There is not a great deal of appetite among the lenders to do lots of unsecured lending, and for the last few years there is a definite push towards 'quality not quantity'," David Black, a banking analyst at Defaqto, told the newspaper.
"Many of the banks are focusing their unsecured lending on existing customers."
Mr Black also noted that the absence of income from Payment Protection Insurance, policies which were normally sold with loans, has contributed to the increased interest rates.
The latest study comes after the British Bankers' Association revealed that consumers borrowed 29% less in personal loans from its members in January than in the corresponding period in 2009.
Last week, financial expert Hilary Osborne wrote in the Guardian that Britons should attempt to clear any outstanding loan debts before securing a mortgage.
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