Even during a extended period of the lowest base rate ever it seems as though lenders are unhappy to offer borrowers unsecured personal loans without a high premium.

One year ago this month the Bank of England ended six months of dramatic rate cuts to try and stave off the effects of the recession, leaving base rate at a record low of 0.5% but that hasn’t stopped personal loan rates rocketing.

According to Moneysupermarket.com, the best £3,000 loan over five years has risen by a massive 1.25% on average, to 14.92% over the last year, which is more than double the average rate of 2007. The best £5,000 loan over the same period has also risen on average to 9.08% from 8.88%.

Tim Moss, head of loans at moneysupermarket.com, says: “There was a time that a personal loan was the perfect solution for anyone looking to borrow to buy a car or consolidate existing debts. But the personal loan market has changed beyond all recognition with rates shooting up and borrowing for relatively small amounts becoming uneconomical. The last twelve months has not been kind to borrowers looking for a personal loan and there is little sign of this changing in the near future.”

In the past it was personal loans people turned to when looking to consolidate debt or find some extra money. Now people have to consider secured loans instead – lenders are a lot happier to lend on properties that are rising in value than to people without security. Talk to a mortgage lender about using your home to raise the cash that you need.

SOURCE: Moneysupermarket.com, 04/03/10

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