Loan rates at 9-year high as debt defaults rise
2 February 2010
According to experts, banks are increasing the interest rates on personal loans as they try to recoup the losses arising from defaults on unsecured debts, the Telegraph reports.
Rising unemployment during the economic downturn led to households struggling to meet their debt repayments, and as a result, the rates on personal loans have hit a nine-year high.
The rise in interest rates comes despite the Bank of England keeping its base rate at the all-time low of 0.5%.
Personal finance website Moneyfacts.co.uk reports that the best rate currently available on a three-year loan of £5,000 is around 9% - meaning debt repayments work out at almost £160 per month.
Michelle Slade, a spokesperson for the website, said: "Unlike on a mortgage, there is no security that a personal loan debt will be repaid."
She added: "Unemployment remains high and when people are struggling to meet repayments, unsecured lending is one of the first debts they stop repaying."
Fill in our form for free expert debt advice
Tags: debt, debt defaults, loan, loan rates, Moneyfacts, economy, personal loan, personal loan debt
Debt & personal finances in the news
Women `less likely to build up debt` than men 12 March 2010
Cost of mortgage debt at six-year low 11 March 2010
Number of savers `on the rise` 9 March 2010
Only one in three `confident about pension income` 8 March 2010
Second `big six` supplier cuts gas prices 5 March 2010