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Personal Loans – Cost Sours in Two Months

By: Gill Critchley

According to a leading price comparison website, the average interest rate that a borrower pays for a £5,000 personal loan has increased from 7.92 per cent in the first week of September to 8.36 per cent.
This increase has come at the same time as the VAT rate has been cut by 2 per cent and it means that the gap between the bank rate and what the customer has to pay back on the loan has almost doubled from 2.92 per cent in September to 5.36 per cent in November.
These percentage increases are yet another reminder of how the credit crunch is affecting families and how lenders have had to come up with different way to recoup any financial losses that they have suffered.
The price comparison site have said that they have always seen an increase in the amount of personal loans taken out after Christmas and into the New Year when people start to take their finances into control, however; they are now starting to see evidence that loans are no longer the cheap form of borrowing that they once were. The only hope is that lenders might make rates on personal loans more attractive after Christmas in order to draw in those who are looking to sort out their finances for the New Year and perhaps after an expensive Christmas.
Advice that is being offered to borrowers is to make sure that you keep a close eye on the deals available on loans and that you pick one that you are almost certain that you will be accepted for so as not to have failed loan applications tainting your credit history.
An independent financial adviser has warned borrowers to watch out for lenders who may be taking advantage of them by not passing on the full benefits of the cut in the base rate. However, with many people facing the risk of redundancy and increasing household costs, there will be many lenders worrying that people will default on their unsecured loans.
The financial adviser also warned people to keep their credit records as clear as possible due to the fact that it is no longer possible to get a cheap loan regardless of your colourful credit history.

There is usually an increase in the amount of personal loans taken out after Christmas. It is well worth keeping close eye on the deals that are available on loans and to pick one that you are almost certain you will be accepted for. Many lenders are concerned that, due to all of the financial pressures many are under at the moment, people will default on their unsecured loans .

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