Monday, May 24, 2010
Category:
Consolidation
According to research conducted by Defaqto, the average interest rate of an unsecured personal loan has risen from 8.8 percent in 2007 to 12.9 percent today.
The independent financial research company has pointed out that this increase has occurred despite the bank base rate falling to a ‘historical low’ of 0.5 percent throughout the period in question.
Insight Analyst for Banking, Kevin Bray, commented: "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. Additionally the number of providers has reduced by a third since 2007 and of those remaining the focus has been on offering unsecured products to their existing customers.
"There is some good news for consumers following the recent announcement from the Government about changes to credit card rules and in particular how payments are allocated. From January 2011 providers must allocate payments to the transactions attracting the highest rate of interest and this is expected to collectively save consumers between £300m - £500m."
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Homeowners who are struggling to meet repayments on expensive unsecured loans could consider tying these debts up into a single secured loan. One of many finance options available, a secured loan for debt consolidation could leave borrowers with just one monthly repayment as opposed to juggling several. This replacement monthly repayment could even be lower than the sum of existing outgoings, thus freeing up useful cash each month. However, if opting for a secured loan to consolidate debt, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
