Personal Loan Rates Are Falling

Personal loan interest rates have fallen to their lowest levels since November 2008 which is good news for those looking to borrow money in 2011.

More competition from large lenders such as M&S Money within the loans industry and an increased appetite for lending has driven interest rates for unsecured personal loans downwards over recent months.

The average rate for the top 10 unsecured personal loans at £7,500 has fallen to 7.89 per cent – the lowest level since November 2008.

Eight lenders have reduced their rates since December with the most competitive deals available for loans between £7,500 and £15,000.

The situation is very different for smaller loans, however. Analysis by moneysupermarket.com shows that those looking for smaller loans will find that interest rates have not fallen. In fact may rates have risen for these smaller loan amounts.

For example, the average rate on the top 10 loans at £3,000 has increased by 2.19 per cent to 15.12 per cent since November 2008, whilst the average cost of a £5,000 loan has increased by 1.6 per cent over the same period.

“it is great to see providers creating some healthy competition in the unsecured loans market after a period of relative inactivity.”, says Tim Moss, head of loans and debt at moneysupermarket.com

“For those looking to borrow over £7,500 there are some excellent deals and in some cases it pays to borrow slightly more as it would cost you less overall. Unfortunately, we have yet to see rates drop as rapidly for smaller loans. I hope providers will start to offer more competitive rates across the board for borrowers so we can see the loans market return to some normality.”, he added.

It is important to emphasise the importance of a good credit score and stable employment history as those without excellent credit histories will be charged significantly higher rates of interest.