Sub-Six Per Cent Loans Soon to be Extinct
According to new figures released by Moneyfacts.co.uk, the availability of cheap personal loans in the UK is dwindling.
Currently in the UK loans market there are only four available unsecured loans that offer an APR of less than 6%. As the government cracks down on Payment Protection Insurance (PPI), a major source of income for some lenders, loan rates are creeping up as lenders look to recoup their losses.
Michelle Slade, personal finance analyst at Moneyfacts.co.uk, said: "At this time of year, when many of us are still recovering from the after effects of Christmas spending or perhaps trying to commit to our new year's resolutions to sort out our finances, personal loan rates are creeping up again.
"With a difference of 14.8% APR, between the most and least competitive rates, shopping around for the best deal is an absolute must. Choosing the wrong deal could be the difference between paying £180 per month or £151 and incurring almost £1,044 extra in interest over the three year term."
The figures also reveal that since January of this year, eight loan providers have increased their interest rates, some by as much as 8%, making it increasingly expensive for unsecured borrowing.
For those looking to make savings on small levels of existing debt, the comparison site recommends opting for a credit card that offers a low rate of interest for the lifetime of the card's balance, rather than taking out a loan which could prove to be more expensive. There are many credit cards in the UK that charge an interest rate of just 3.9% for the lifetime of the balance, making them appealing to those who may need time to pay a small debt.
However, Ms Slade added note of caution for those opting for this option by saying: "If you do opt for one of these credit card deals, as opposed to a personal loan, the real way these will save you money is to maintain a repayment level similar to that of a structured loan, otherwise making only the minimum repayments will extend the loan term, incurring more interest."
8th February 2007
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