According to recent reports many cash strapped consumers are paying higher than average rates of interest on personal loans, and amongst those being stung by these higher rates are pensioners and those that have a damaged credit rating – groups who are often struggling financially and can therefore ill afford to be paying higher rates of interest than most others. It is thought that some poorer consumers could be facing interest rates of close to 20 percent on personal loans with some lenders.

Earlier this month the Nationwide decided to introduce a new system that based borrowing around risk based pricing, where the interest rate was partly based on the credit history and ability to repay of the customer rather than on the size of the loan, which has been the deciding factor in the past.

This means that poorer consumers on lower incomes will end up paying more in interest on the same loan than someone with a more secure future and higher income.

Industry officials have said that this sort of risk based pricing means that lower income people with less money will inevitably end up being penalised by lenders because of their lower income.

A Nationwide official said: ‘As a prudent lender in the current credit environment it is important that, in pricing personal loans, we are placing a greater emphasis on risk and lending appropriately.’

However, one financial expert simply stated: ‘The net effect is that the people who can least afford it end up paying more.’ One consumer stated: ‘It seems so unfair that someone who is on a higher income and already earns more cash will be able to borrow at a far lower rate than someone on a lower income who has to be more careful with money. It seems to reinforce the old adage of the rich getting richer and the poor getting poorer.’

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