Those looking to take out a personal loan should carry out as much research into the market as possible.
Such is the assertion of MoneyExpert which reports that a number of loan lenders are increasing the rate of interest attached to their borrowing at a pace that is outstripping base rate rises by the Bank of England's monetary policy committee (MPC). Since November 2006 the MPC has put up the cost of borrowing from five per cent to its current figure of 5.5 per cent. However, loan rates have surpassed this level. For a person looking to borrow 3,000 pounds the price comparison website claims they will now pay an average of 14.9 per cent, a "staggering" rise of 2.55 per cent from the 12.35 per cent noted in November 2006.
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Meanwhile, those with a loan of 12,500 pounds have seen the amount of interest charged on such a product rise by 1.6 percentage points to stand at 8.78 per cent over the last 14 months. Following on from such increases by lenders, MoneyExpert states that this has affected people's ability to make repayments. In the six months leading up to December 21st, the firm suggests that 926,000 people, about one in 50 adults, have not been able to meet demand for payment on a personal loan as they struggle with rising living costs. The company also pointed out that the effects of the credit crunch have seen some lenders apply tougher restrictions towards those looking to borrow. The firm also pointed out that a number of unsecured loan providers have withdrawn from the market entirely.
Commenting on the study, Sean Gardner, chief executive of the price comparison website, suggested that despite the diminishing availability of cheap loans people should still be able to get a competitively-priced product.
He said: "The unsecured loans market has always been extremely competitive and there are still some good deals to be had. Paradoxically it is often the case that borrowing more will cost you comparatively less - but that's not always true so people should research the market carefully."
In addition, the chief executive put forward that getting a loan for the purposes of debt consolidation can be a helpful way for consumers to manage their money, especially when experiencing times of financial difficulty. However, he advised those looking to get a debt consolidation loan to make sure they will always be in a position to pay back their borrowing. Mr Gardner said: "With the cost of living on the increase the obvious thing to do for anyone feeling the strain is to borrow money to tide themselves over. But people who want to take out a loan to consolidate debts or to make a large purchase must be wary of the overall cost."
For those concerned about their ability to manage money over the coming months, taking out a quick loan could prove to be of assistance in paying the likes of household bills and plastic cards. Speaking last month, Iain Wrenshall, director of debthelpuk, advised that prospective borrowers should make sure they get a personal loan from a respectable provider. In not doing this - and so choosing from an unscrupulous loan shark - borrowers may find that they will not receive the normal legal protection they would get from a reputable lender.
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