Personal loan rates are unfairly high

Consumers are paying nearly a ten per cent premium for their personal loan and lenders are restricting their best deals for existing customers only.

Borrowers looking for a personal loan have to pay around 10.32 per cent APR, yet the Base Rate remains at 0.5%, according to findings from MoneySuperMarket.com.

Those looking to borrow £5000 or less are being hit hardest, whereas loans of £10,000 or more attract lower rates, nearly 2% less.

These rates are considerably worse that 12 months ago.  In August 2008 the gap between average loan and base rate was 3.4%

MoneySupermarket.com also found that a number of lenders are restricting their best deals for their existing customers.

Tim Moss, head of loans and debt at moneysupermarket.com said: “Despite the Bank of England slashing Base Rate to 0.5 per cent in March, loan rates have continued to rise, leaving consumers paying through the nose for their personal loans. Borrowers looking for a smaller loan of around £5,000 will be hit harder than those looking to borrow more.”

“…Competition seems to be returning to the loan market which is great news for consumers; however lenders will need to continue reducing rates if they want to draw customers back, particularly those who want to re-consolidate their debt.”

Consumers might want to consider taking out a secured loan for larger loan amounts, although interest rates for these types of loans can also be high compared to the current base rate.