Those looking to apply for a personal loan in the coming weeks are being advised to spend time searching for a competitively-priced deal, an industry expert has stated. Lisa Taylor, analyst at Moneyfacts, reported that the past few days have seen a number of loan lenders increase the rates of interest attached to their personal loan products.£100 loan bad credit According to the financial services expert some nine credit providers have hiked interest rates on some tiers by as much as four per cent. And with the cost of loans said to have taken a “real battering”, those looking to borrow could now be set to witness furthered financial pressures.
Figures released by the firm revealed that those opting for a personal loan from Bradford & Bingley and the Derbyshire Building Society could have the greatest rise in financial difficulties as they will find that they could pay an extra 290 pounds 52p and 270 pounds 72p respectively, on a 5,000 pounds loan payable over a 36-month period. Meanwhile, borrowers with Cheshire are to see their costs rising by 255 pounds 24p during the three years.
Ms Taylor said: “The last nine months has seen a steady increase in the rates available for unsecured personal loans. Only four months ago sub-six per cent rates were available, whereas today you would be hard pushed to get your hands on a rate of less than 6.9 per cent. With increasing uncertainty in the financial markets, rising levels of bad debt and a year of interest rate rises putting pressure on our disposable incomes, it comes as no surprise to see lenders increasing their lending margins in what has become a far more risky environment to do business.”
She added that those looking to apply for a personal loan should take the time to ensure that they get the most competitively-priced loan possible. Ms Taylor continued that by opting for the “wrong” personal loan, borrowers may be paying up to twice the amount necessary in interest. With the difference between the cheapest and the most expensive loan standing at more than 14 pounds a month, consumers could find themselves paying over 500 pounds extra over the course of the three years they repay their loan back over should they plump for a costly method of borrowing.
And with possible uses for a personal loan ranging from carrying out home improvements to purchasing a car or as a means of debt consolidation, the Moneyfacts analyst recommended that those particularly opting to borrow to merge their existing debts into one low-rate monthly repayment should consider their options carefully. She stated that the “golden rule” for any type of debt consolidation is for borrowers to “cancel, close and cut up” any previous forms of credit. Ms Taylor reported that by keeping the likes of overdraft limits and credit cards open, consumers may be tempted to go back into the red and “a few months down the line you could be back to square one”.
Such sentiments were echoed by Steven Baillie, head of loans for Sainsbury’s Bank, earlier this year. According to the financial expert, the majority of Britons who borrow are looking to use credit as a debt consolidation loan. In doing so consumers may well be able to merge debts accrued from a variety of sources into a single monthly repayment which may mean that they have more disposable income. However, he advised those making such a choice to be “strict” with themselves and to ensure that they do not get back into debt at a later stage. In addition, he stated that shopping for the right loan product “is the most important thing” prospective borrowers should do.