Thursday, June 11, 2009
Category:
Secured Loans
According to Moneyfacts.co.uk, unsecured loan rates have increased by up to 44 percent during the course of the past 2 years.
Those requiring a loan to the value of £5,000 have seen the most significant rise from 8.6 percent in May 2007 to 12.4 percent today. The next most notable increase in the same period was found to be on loans of £25,000, for which the average rate has now reached 9.2 percent from 7.3 percent.
Analyst at Moneyfacts.co.uk, Michelle Slade, commented: "Despite bank base rate being at an all time low, borrowers looking for a personal loan have seen no benefit. Those looking for just £5,000 have seen a staggering jump in the cost of a loan. In May 2007 a customer would have paid £664 interest on a £5,000 loan over a three year term, whereas today that has jumped to £957.
"With many providers showing just typical rates, the actual increase a customer has to pay today compared to a few years ago could be much higher. Tighter lending criteria is likely to mean only those with a perfect credit history will be getting the best rates. Rising unemployment has meant the risk of customers defaulting on unsecured loans has increased and this increased risk is being seen in higher rates.
"If a customer is struggling to meet repayments, unsecured lending is likely to be the first on which customers default, rather than secured lending such as their mortgage. In the last year, 19 personal loan products have been withdrawn from the market. If a personal loan is required, borrowers have much less options.
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Homeowners that are presently shopping around for loans, and who are looking for an alternative to an unsecured loan, may wish to consider taking out a
secured loan instead. This finance option could pave the way to those much-desired home improvements, or it could be used to tie up existing debts. With regard to the latter, a debt consolidation loan could leave the borrower with just one monthly repayment as opposed to juggling several. In addition, the new repayment figure could be lower than current outgoings. When taking out a debt consolidation loan, it must be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
