Personal loan providers up rates

The personal loans market has shrunk by 37% in the last 12 months and rate have climber, according to new research from uSwitch.com.

According to the report, since the start of September, three unsecured personal loan providers have implemented rate hikes of up to 1.2% for new customers. This product ‘tweak’, although seemingly small, could cost personal loan customers an extra £322 in interest paid on a typical loan of £10,000. With UK consumers currently forking out £181 million in interest daily, this will only add to an already hefty bill.

As consumers struggle to manage their debts in the current climate, their chances of consolidating to a low cost loan have also been vastly reduced compared to this time last year. There are currently 36 personal loans available to consumers, this is compared to 57 loans that were available this time last year, a drop of 37%. At the same time, the average loan rate has increased from 9.04% to 9.08% in the last year.

Providers that have increased rates since the start of September include Marks and Spencer Money, Egg and Alliance & Leicester.

Louise Bond, personal finance expert at uSwitch.com, said:

“As consumers struggle to make ends meet and manage their finances, loan providers are looking to offer the best rates to those whose financial behaviour they can closely inspect – which are their existing customers.”

“Last year 1.3 million consumers used an unsecured personal loan for debt consolidation purposes. However, with the number of personal loans available dropping by 37% this year and rejection running high, it would be highly unlikely that a similar number of consumers would be able to consolidate their debts this year. However, for those that are thinking about, or attempting to do this, it would definitely be worthwhile finding out what rates existing providers can offer, as it seems loyalty is one of the only aspects that could win consumers better interest rates at the moment.”

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