This product ‘tweak’, although seemingly small, could cost personal loan customers an extra GBP322 in interest paid on a typical loan of GBP10,000. With UK consumers currently forking out GBP181 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:

1. Marks and Spencer Money – selected rates increased by 1.2%

2. Egg – GBP3,000 to GBP20,000 increased by 1% to 14.9%

3. Alliance & Leicester – GBP5,000 to GBP7,499 increased by 0.1% to 8.9% and GBP7,500 to GBP15,000 increased by 0.8% to 8.7%

However, it seems the trend for offering the best deals to “brand new customers only” does not currently extend to the unsecured personal loans market, with the best deals currently being offered to existing customers. The average interest rate in the Best Buy table for existing customers is currently 7.94%, with Nationwide topping the table with its Existing Customer Personal Loan Plan at 7.7%. However, new customers can expect to be hit with an average interest rate for a Best Buy loan of 8.08%, 0.14% higher.

Louise Bond, personal finance expert at uSwitch.com, comments: “As consumers struggle to make ends meet and manage their finances, loan providers are looking to offer the best rates to those who 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.”

Via EPR Network
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