Borrowers hit by unsecured personal loan interest

22 August 2008

Rate increases for unsecured personal loans may be hitting people seeking consolidation loans, according to information from uSwitch.

Statistics from the comparison service found borrowers have seen rates for loans of £1,000 increase from 16.55 per cent annual percentage rate (APR) to 19.99 per cent APR over one year.

Furthermore, citing information from YouGov, the study found people taking out the average loan of £7,194 over five years are likely to pay £285.60 more in interest, if today`s best buy loan is compared with last year`s. This equates to a global cost of £1.2 billion, it said.

The figures may create concern for those planning to take out a loan but who want to avoid serious debt problems.

"However, the market is vast and there are still competitive rates for those who take the time to compare the offers available," said head of personal finance Simeon Linstead.

He added that small loans are often hit with high APRs and other options like credit cards may be a viable alternative. Searching online for loans may also turn up cheaper deals, he said.

This week, Which? said price comparison sites could be confusing for borrowers.

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