As the number of personal loan providers offering products decreases, the average loan interest rate increases, according to new reports.
Figures from Sainsbury’s Finance earlier this month found that average rates for personal loans have increased by 8.3 per cent in the two years to September 2010.
Over the period, 62.5 per cent of loan providers upped their rates – this is despite the fact that the Bank of England reduced base rates from 5 per cent to 0.5 per cent over the same two-year period.
Clearly, the increase in personal loan rates does not reflect the base rate. Instead it is entirely reflective of the fact that the number of personal loan providers fell by 40 per cent over the two years.
Experts claim that the best way to get a good deal from a personal loan is to focus on the APR (annual percentage rate) and the TAR (total amount repayable) in order to pin down exactly what you will be paying back.
It is also worth bearing in mind that the advertised rates are 'typical' and that borrowers with bad credit ratings may be offered higher interest rates than the more financially sound.
