Personal loan rates increase

19 August 2008

A number of personal loan companies have increased their rates, according to Moneyfacts.

People hoping a loan will solve their debt problems will not welcome the rate increases, while those planning for the future using a personal loan should be wary of repayments.

According to the independent personal finance provider, borrowers should now expect "the highest levels of repayments seen in the last six years".

Moneyback Bank customers are now looking at an annual percentage rate of 7.6 per cent on a £15,000 loan over three years – a rise from 6.3 per cent in 2007 and 5.6 per cent in 2006.

This is the cheapest deal available for such a loan and Moneyfacts is concerned some borrowers are not shopping around but taking on higher rates by choosing their regular banks.

Commenting on a rise of almost three per cent on an average rate between 2006 and today, the provider said: "This is extremely bad news for consumers who may be considering consolidating existing debts to try to drive down their monthly expenditure."

In related news, First Direct has launched a new offset mortgage for remortgaging customers only.

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider.