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Loan Rates on the Rise for the First Time this Year

Interest-Rates / Debt & Loans Apr 18, 2016 - 02:05 PM GMT

By: MoneyFacts

Interest-Rates

Personal loans have become increasingly competitive over the last few years with considerable rate cuts resulting in some of the lowest rates ever seen. However, it now appears that some providers can no longer sustain such low prices, so rates are once again on the rise.


According to Moneyfacts.co.uk, most rate rises have been concentrated on the £7,500 loan tier, which is typically used as the advertised tier for most personal loans, and while the rises are small, it could signal the start of a gradual upward trend. As yet, the rises have not yet been introduced to the lowest deals currently on the market, so Ikano Bank, which offers a rate of 3.2% APR for loans of £7,500 over five years, still maintain the lowest rate ever recorded*. However, the table below clearly shows that average rates are beginning to increase.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“The personal loan market has had its fair share of rate cuts over the years, but with average loan rates rising for the first time this year, we may be witnessing the start of a slow climb in rates away from their record lows.

“Anyone thinking of consolidating their debts or taking on a new loan, such as to finance a new car, will still find some great deals in the Best Buys, but customers should never assume that the rates currently available will stay this low forever. For this reason, they may want to move fast if they want to get a highly competitive deal.

“Alternatively, if someone is looking to borrow a small sum, they may do better taking out a credit card with an interest-free term. For example, a highly competitive personal loan of £3,000 over three years with a rate of 7.4% APR would cost borrowers £342.60 in interest, while the same amount borrowed from the market-leading 40-month interest-free balance transfer credit card would cost just £77.70 in fees, saving borrowers an impressive £264.90**. Customers just need to ensure that they can pay off the credit card before interest kicks in to save them from paying unnecessary interest.”

*Moneyfacts average loan data spans back to June 2006. APR = Annual Percentage Rate.

**One of the best loans for borrowing £3,000 over three years is from Sainsbury’s Bank, which has a rate of 7.4% APR, giving total interest of £342.60. By comparing this with the best balance transfer card, which is Virgin Money’s 40-month interest-free deal with a 2.59% fee (£77.70), the difference in cost is £264.90.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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