New analysis has shown that personal loan rates have hit their highest peak for a decade.
The research from Moneyfacts finds that the average rate on a personal loan of £5,000 now stands at 12.7 per cent, the highest it has been since May 2000 when loan rates hit 13.1 per cent. It has jumped from 12.3 per cent last year and 12.1 per cent in 2009. Between May 2004 and 2007 the average rate for a personal loan of this size did not top nine per cent.
Rising personal loan rates are due to the increased risk presented to loan providers during this period of economic uncertainty and stretched budgets, according to Moneyfacts. Another factor causing rates to rise is the recent Payment Protection Insurance (PPI) ruling, which will see fewer people paying out for PPI in the future, as well as banks having to repay significant sums of money for PPI which was mis-sold.
Michelle Slade, spokesperson for Moneyfacts.co.uk, commented, “With £1,194 difference between the cheapest and most expensive £5,000 loan, shopping around is key."
She added, “However, borrowers need to be wary of making multiple applications as this will reduce their chances of being accepted."
She also advised people not to necessarily presume their bank would offer the best deal, highlighting the competitive personal loan rates being offered by many supermarkets.
