With rates of personal loans reaching their highest levels in more than a decade, borrowers are being urged to shop around before they ask to borrow money. Moneyfacts.co.uk new research shows rates are at their highest since May of 2000 with a £5,000 loan having an average rate of 12.7%.
Over the last ten years the average rate for personal loans has fluctuated a great deal with rates less than 8% in May 2006. But since that date rates have increases and it is slowing edging towards the rate of 13.1% from May 2000. Moneyfacts.co.uk spokesperson, Michelle Slade, explained the reason for the high rates is because unlike a mortgage the bank has no collateral to fall back on if the personal debt is not repaid.
Plus in the present market where finances in the household are stretched to the limit the risk default on the repayment increases and that is passed on to the consumer via higher interest rates. Recent judgments no longer allow banks to recoup revenue through payment protection insurance which was the norm in years past. The difference between the cheapest and most expensive loan for £5,000 is £1,194, the current research shows.