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

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog.

The Government has been criticised for just cutting interest rates and not thinking about those who are already burdened with unsecured debt.

According to fool.co.uk, six out of ten people say another cut in rates will not help. They are already in debt, and their mortgage and their loans may not be affected by any changes to the base rate.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “The 1% cut in rates has brought the cost of borrowing down to levels not seen since World War II. However, it is unclear whom the rate cuts are supposed to benefit – it won’t assist with credit-card and store-card debts.”

It may not. But there is no point waiting to be rescued if you are over-burdened with unsecured debt. There are trillions of pounds of debt owed by Brits, and the Government cannot pay that all off, however good they are.

The only person who can really help you is yourself. You have the ability to use your home’s equity and you are the one who can plan your finances so as to limit debt and start paying off your responsibilities. You are also the one who can pick up the phone and talk to your mortgage adviser.

The base rate might not affect you, but a mortgage adviser can. They can point you in the right direction and help lift some of the burden off your shoulders. It might not be easy and it might take time, but it is better than waiting for a solution to come riding round the corner.

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog.