July 6, 2009
Unsecured Rates On The Up
As the recession rolls on rates continue to get worse – and none more so than unsecured loan rates. This is a worry because as they rise, more people could find themselves in more financial difficulty.
In just four weeks, seven unsecured personal loan providers have implemented rate hikes of 1% for new personal loan customers, increasing the average loan rate from 8.74% to 9.07%, according to uSwitch.com.
This may seem like quite a small ‘tweak’, but on a £10,000 loan over five years, the total amount of interest paid will increase from £2,283 to £2,371.
This is a real problem for borrowers that are struggling with several debts and are desperate to consolidate. Last year, 1.3 million consumers used an unsecured personal loan for debt consolidation. If this trend continues throughout 2009, consumers trying to do the right thing and keep all their debts in one place will end up paying almost £100 more in interest compared to this time last year.
Louise Bond, personal finance expert at uSwitch.com says: “Hiking loan rates in the current climate is just making an already difficult situation practically impossible for consumers. Much as we understand that the banks are struggling, these are big hikes for people to swallow. With all eyes on mortgages and savings, it seems unsecured loan providers are slipping under the radar slightly.”
It simply doesn’t pay to take out an unsecured loan. The rates are not competitive, the terms are stringent and the penalties severe. If you are looking to consolidate debt, talk to a financial adviser about taking out secured, sensible debt – it won’t drag you down and will help improve your long-term prospects.
SOURCE: uSwitch.com, 30/06/09
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