Interest rates on
personal loans have significantly increased during the last three years, according to new figures.
Such charges have continued to rise, despite the
Bank of England dropping its base rate from 5.25 per cent to 0.5 per cent since 2007.
According to figures from market analyst Defaqto, the interest on a loan of 5,000 repaid over three years is now 12.9 per cent compared to 8.8 per cent three years ago.
Furthermore, there are now less borrowing options available, with the number of different loan products falling from 88 to 56 during the same time period.
Kevin Bray, insight analyst for banking at Defaqto, said issues with loan repayments have been a factor in driving up interest rates.
"The increasing cost of unsecured lending reflects the lack of appetite for risk in this area with many providers suffering from high arrears and default rates," he explained.
Mr Bray said borrowers now had less loan providers to choose from than in 2007, noting that lenders were tending to favour their existing customers.
Currently, there are 38 lenders offering
personal loans, which has fallen by around a third from 60 three years ago.
